Considering a Novated Lease? 9 Questions To Ask Before You Sign
Knowledge is power, especially when entering a Novated Lease for the first time. But if you don’t know what you don’t know, how can you be sure you’re getting the best deal? By asking the right questions upfront, you’re far more likely to identify the Novated Lease that’s right for you. So here are our 9 questions to ask before you sign on the dotted line.
1. Is the purchase price competitive?
If you choose to source a new vehicle yourself, you may not be getting the lowest purchase price possible. That’s why it’s always worthwhile to check with ORIX or your finance provider who may be able to get you a much better deal.
2. What’s my interest rate?
You can’t avoid paying interest, but you can avoid overpaying interest. So call, click and question until you find the best interest rate for you.
3. Have I been quoted using the best method?
Novated Leases are quoted according to one of three methods: the Employee Contribution Method, the Statutory Method and the Operating Cost Method.Each method is built for different purposes and different people. So be sure to ask your finance provider what method they’ve chosen and why it’s right for you.
4. Am I being charged extra fees?
Some fees are a standard part of leasing agreements, but not all of them. For example, some finance providers charge establishment and document fees, while others don’t.
It’s also a smart idea to ask if you’ll incur costs for adjusting your lease down the track. By checking if there are any amendment fees now, you can prevent nasty surprises later.
5. Am I paying for any unnecessary insurances?
Some providers include unnecessary insurances – which hike up your quote for no good reason.
Be aware of insurances you may not need. For example, you may be offered insurance that covers harm to your tyres and rims as a result of punctures and blowouts. However, many people find they’re better off paying for new tyres and rims if needed, rather than buying insurance.
6. Is protection insurance included?
Although you may not need some insurances, Novated Lease Protection Insurance is a smart idea.
This insurance looks after you in case you can’t make your repayments due to a tragic or unexpected event (such as involuntary redundancy). So check that it’s included and whether there are any conditions.
7. If I end my lease early, what interest rate will I pay?
It’s important to ask how much interest you’ll pay if you terminate your lease early.
Whilst most finance providers require you to pay 100 per cent interest for the remainder of your leasing term, others – like ORIX – only charge you 80 per cent.
8. How accurate is the residual value?
Your quote will be based on the expected value of your car at the end of the lease (otherwise known as your car’s ‘residual value’). So it’s important to determine whether the residual value quoted is accurate.
To help you make this judgment, consider the number of kilometres you expect to have clocked up by the end of your lease, as well as the depreciation rate applied to similar cars.
9. What are the fixed costs?
Evaluating fixed costs is one of the simplest ways to compare quotes from different providers. These typically include:
- Monthly finance rental
- Monthly management fee
- Post-tax contribution
- Residual value
- Establishment, document or amendment fees (if any)
- Re-Novation fees (if any)