How do I Salary Sacrifice a Car Loan?

Red Alert: Don’t buy a car without reading this first!

You may have heard the terms, “salary sacrificing”, “salary packaging” or a “novated lease” used in reference to buying cars.

Well understanding them and how relevant they are to your work situation could save you a lot of money when purchasing a car.

Here’s a quick, user friendly hit list to see if salary sacrificing a car loan would be a good move for you.

One quick definition first:

A novated lease is an arrangement with a financier where you agree to make monthly repayments for an agreed time and to make a one off payment for the balance of the loan. Novation refers to a process where most of the responsibility for the finance rests with your employer, while you’re under their employment. You always remain responsible for the balance payment.

So, why would you want to salary sacrifice a car loan? Well…

Salary packaging your car loan can save you money

You don’t have to pay a cent of the 10% goods and services tax (GST) that every licensed dealer adds to the purchase price of cars.

Also because your repayments and the cost of running your car comes out of your salary before tax it effectively lowers the amount of income you are taxed on and the amount of tax you have to pay.

It gets better…

  • The definition of a “car” is broader than you think

The tax office defines a car as any motor car, station wagon, panel van or utility designed to carry loads of less than a tonne.

All other goods carrying vehicles designed to carry less than a tonne and all other passenger vehicles designed to carry less than nine people.

Odds are your chosen vehicle will fit this category, making you eligible to salary package your car.

  • I haven’t decided exactly which model of car I want to get yet so don’t know how much I’ll save?

Don’t worry just one of our friendly Rate detective consultants know roughly:

The kind of car best suited to your requirements, i.e., family sedan, Ute, 4wd etc.

How many K’s you roughly think you’ll do a year.

Whether you’d prefer a 1,2,3,4 or 5 year lease option.

Whether you’re full or part time and your current gross salary for the year.

From this information they’ll be able to provide an approximate quotation showing you how much you’ll save.

  • Very competitive interest rates

Your specialised Rate detective car loan consultant leaves no stone unturned in aligning your personal requirements against our panel of leading financial institutions.

We have found by experience that a novated lease can be a superior alternative to purchasing a car via a personal loan or higher purchase agreement.

  • Can I salary package a car I’ve already bought?

Yes often you can through a Sale and Lease Back novated lease option provided your car falls within the age and budget requirements for a novated lease

  • I’ve heard the car has to be exclusively used for work purposes?

You’ve heard wrong, the car can definitely be used for personal use.

  • There seems to be a few “ins and outs” to the process how do I avoid making mistakes?

Well you’re right, as with any financial arrangement there is a process to follow, that’s why your Rate Detective consultant will stay with you every step of the way offering you there experience and guidance.

  • Ok, so how do I get started and find out more?

That’s the easiest part call or email Rate Detective today to enquire today whether salary sacrificing your next car loan is the right option for you and how much might you save by doing it.


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Published on July 7-st, 2014 in Car Loans
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.

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Any information or advice contained on this website is general in nature and has been prepared without taking into account your objectives, financial situation or needs.

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