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The best solutions to your vehicle financing needs
How you structure vehicle financing can make a huge difference to your tax position. It can be complicated. Let the experts at CXC Global, and their hand-picked providers, help you get the right solution for you.
CXC Global uses a range of providers within the novated lease and vehicle finance space. Depending on the requirement, each of the partners in this area works closely with CXC Global to provide the best solution to our clients.
This value-add service is a very effective way to reduce your tax liability by getting a tax deduction for a large portion of your expenses.
We have developed a set of policies and procedures to ensure smooth operation and appropriate use of this aspect of our salary packaging service.
Please bear the following points in mind. If you have any questions or want any of the points clarified, please contact your CXC Global Account Manager.
Before you lease a vehicle Some things to think about before you consider leasing a vehicle: - Our novated lease calculator will provide you with an approximate costing of leasing a particular vehicle, or even a costing for a certain price of a car. You will also need to think about how long you want the lease to be, and how many kilometres you expect to travel in a year.
- Your CXC Global Account Manager will also be able to tell you the tax/salary packaging implications of this amount the car costs you - that is, the real cost.
- At this point, you can shop around for the type of vehicle you want. The lease companies we work with will be happy to purchase a car that you have negotiated a price of - as long it is through a registered dealer.
- If you are buying a new car, bear in mind that the lease companies buy thousands of cars per year. They may be able to secure you your chosen vehicle at a lower price.
- If you have an existing lease that you would like to transfer to CXC Global, please contact your CXC Global Account Manager. They will be able to discuss with you the issues specific to this scenario.
- If you are considering reorganising your finances by selling your car to a leasing company and leasing it back off them (commonly called a lease buyback), speak to your CXC Global Account Manager. Once the initial issues of the buyback are resolved, the lease will operate in the same manner as a normal lease.
FAQ’s Q: What is a novated lease and how does it work? A: Novated leasing is simply a car lease that you have your employer pay the costs of with your pre-tax income. This makes the costs of leasing and running the car tax deductible.
You will also be liable for Fringe Benefits Tax. The tax payable is set by the Australian Taxation Office (ATO) as a certain percentage of the value of the car. This percentage is determined by the amount of kilometres you will drive the car in a given year, and this includes all business and private travel you undertake.
Q: Am I able to use any lease company or finance company I wish to? A: No. Novated leasing a vehicle for an employee requires a company to enter into a specific leasing agreement with the company, and this process would make it impractical for you to get a car lease in a timely manner if we had not executed this agreement in advance. We have pre-arranged agreements with two companies who both offer a wide range of flexible services and have delivered high levels of service to our members in the past.
Q: Can I get a lease even though I am on a contract? A: You can, as long as you have 6 months of contract ahead of you at the time of application. As a rule, leasing companies are not overly comfortable with contractors. However, when you are with CXC Global and you have a 6 month contract, we are more than happy to vouch for you as your employer for this purpose.
Q: What options do I have if there is no chance of getting a 6 month contract currently? A: If you are in a situation where you are not going to have any chance of getting a 6 month contract, or maybe you are halfway through a 6 month contract, you do have options. We may be able to assist you by extending our normal policy of one month of double deductions for additional months. Please contact your Account Manager for full details.
Q: What happens if my contract ends and I cannot find another one immediately? A: If you have a contract end coming up and you are not sure if you will have another contract to start within a few weeks, you can prepare for this by contacting your CXC Global Account Manager and asking them to find out your current lease status.
You may find you are ahead of your lease and can afford to miss some payments. If you are not able to miss payments, you could arrange to have additional funds taken from your last few pays before the end of your contract to keep you ahead of your lease while you are not working. If the end is unexpected, you should contact your CXC Global Account Manager and let them know so we are at least aware of the situation and can monitor it for you.
Q: What happens if I am not able to find a contract for an extended period or I decide to take a permanent role? A: If you were to stop working through CXC Global, you have two options.
If you get a permanent role, you are most likely to be payrolled directly by your new employer. Most companies have the capacity to take over leases (as CXC Global does if the situation was reversed) and their preferred leasing company will be able to tell you how to make this happen.
If you are out of work, or your new company will not allow you to transfer the lease, you can have the lease converted into a private finance lease. As a finance lease you will not have to pay the fringe benefits tax (but you will lose the tax benefit of the salary packaging of the car), but you will need to pay GST. You will also have to pay for your running costs directly (you will not have a fleet card).
Q: How do I pay for the running costs of the car? A: You will be given a ‘fleet card’. This is like an EFTPOS card which is accepted at most relevant businesses (mechanics, petrol stations, and so on). In your initial quote the lease company will estimate the cost of running the car over a year. They do this based on their experience in the past and the amount of kilometres you anticipate travelling.
They then add these costs to the finance/lease cost and instruct CXC Global to deduct them from your pay (as described above). If your running costs are higher than expected, you will be asked to contribute additional funds to cover these costs (that is, keep money in your “EFTPOS” account). This may mean you will have one-off requests for additional payments by CXC Global.
Q: I own my car: can I take advantage of novated leasing? A: You can use a facility called a lease buyback. This is where the leasing company could buy your car from you and lease it back to you. This will not only give you tax benefits, but it will free up the cash you have held in the ownership of the car for use in more effective investment options. This might include your mortgage or the share market.
Q: How long can the lease go for? A: You can choose any period from 1 year to 5 years. If you are on a 457 work visa you will not be able to take out a lease that extends beyond your visa expiry date. Please speak to you CXC Account Manager if you have any questions about the implications of longer or shorter lease lengths.
Q: What is the ‘residual’ and what does this mean at the end of the lease? A: The same as any other type of car lease, you will be assigned a residual figure. This figure is determined as a percentage of the total value of the car and is based on the anticipated value of the car at the end of the lease period as well as depreciation. You will be paying for the financing of the car, only to the extent of the amount of value of the car you will use while you have it. That is, instead of borrowing $50,000 for a car, if the residual on that car is $24,000 after 3 years – you will only be paying for the financing of that $26,000 in value you are ‘using up’.
Of course, the leasing company will own the vehicle at the end of the lease period. You can choose to roll the lease forward and re-lease the car at its new value, or you can buy the car outright at the new value (plus GST on this residual value). You will also be able to hand the car back.
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