A novated lease is a form of salary sacrifice where you use your pre-tax income to make lease repayments for a car.
BMW has a wide range of vehicles which you can lease to take advantage of the multiple tax benefits novated leasing offers.
At the end of your novated lease you can either choose to pay the residual payment for ownership or begin a new lease with a new vehicle.
What is a BMW novated lease?
With a BMW novated lease you can sacrifice part of your salary to lease a BMW. This happens through a three-way agreement between the employer, the employee and finance company.
BMW has a huge range of vehicle options available for leasing.
Crucially, your lease payments are taken from your pre-tax income. This means you reduce the amount of income tax you owe.
By leasing the BMW you won't outright own the car but at the end of the lease you'll have the option of paying off the remaining cost or leasing a new car.
Step by step guide to BMW novated leasing
Speak to your employer. You need to check whether your employer already offers novated leasing as an option or whether they are willing to. You can then work with them to find the right provider.
Choose your BMW. BMW offers an extensive range of vehicles. Depending on the provider you may not have access to every BMW vehicle.
Get a quote. It's important to understand the costs before you commit and then calculate your lease repayments so you know how much is coming from your salary each month.
Package the lease with your employer. Finalise the lease structure, including whether you're opting for a non-maintained or fully maintained novated lease.
Begin repayments. Once you've got the car you'll begin regular payments towards your lease from your pre-tax income. This means you don't need to worry about anything apart from the reduced pay check.
What are the benefits of novated leasing a BMW?
For the employee
Cost and tax benefits. If you want to buy a BMW anyway, novated leasing one is a cost-effective option because it saves you money on tax.
Easy finance management. Because lease repayments come out of your pre-tax salary, you don't have to worry about making the repayments yourself.
After-lease sale benefits. If you choose to buy the BMW at the end of the lease agreement, you can sell it on tax-free.
No usage restrictions. There are no restrictions on having to use the car for business purposes.
For the employer
A way to offer incentives. Offering novated leasing is a great perk to offer your employees.
Limited risk. If your employee leaves during the lease, the responsibility of the lease goes with them.
Not attached to the business. Novated leases are not considered an asset or liability of the business.
No company fleet necessary. Novated leases are a way for your employees to access discounted vehicle leasing through your company without the business needing to manage a fleet.
BMW novated leasing and tax
Income tax
The payments for your novated lease come out of your pre-tax salary. This reduces your taxable income, which could even mean you move down into the next tax bracket. Regardless, this makes it a more cost-effective option than using post-tax salary to make loan repayments.
Fringe benefits tax
BMW has several electric vehicle options you can choose from for your novated lease. By choosing an electric vehicle it is exempt from fringe benefits tax (FBT). Although this is a cost the employer has to pay, it usually gets passed on to the employee through their repayments.
Luxury car tax
If you choose a BMW under the luxury car tax threshold you won't need to pay the tax. This threshold is higher if you choose one of BMW's electric vehicles, but there are limited options for BMW EVs under the threshold.
Example: Sarah's Smart Salary Swap
Sarah earns $130,000 in Melbourne and commutes 50km daily. She's eyeing a BMW iX1.
Via lease: Her pre-tax lease is $325/week, bundled with insurance, registration and servicing. Outright or loan: Would cost her $4,000+ more annually after tax.
Thanks to EV FBT exemption and GST concessions, she saves ~$5,200 per year, all while enjoying a luxury SUV without the sting of a big balloon payment or debt stress.
What to look for when comparing BMW novated leases
Vehicle options. Not every lease provider can provide every vehicle. If you have an idea of what vehicle you'd like be sure to check the providers to make sure they have that option.
Costs, fees and charges. Be clear on what costs and fees will be included in your repayments. Don't forget to include the running costs like maintenance and fuel if you're opting for a fully maintained lease.
Luxury car tax costs. When you're looking at vehicles, remember to think about the additional costs that come with vehicles over the LCT threshold.
Flexibility. Take a look at the lease terms and conditions so you know what you're signing up for. Look out for flexibility around adjusting the lease period and whether you can swap your car sooner.
Frequently asked questions about BMW novated leasing
The cost of your BMW novated lease will depend on the make and model of BMW that you choose. With so many models to choose from there's a huge difference in the prices of the cars. You should use a novated lease calculator to understand how different the costs are based on the price of the car you choose.
If you change your mind and want to end your novated lease, you'll still need to pay out the remaining cost. You may even face early termination fees.
This is the case even if you simply want to change the vehicle, so it's a good idea to take your car for a test drive before you make any decisions.
Fully maintained novated leases should come with adequate level of insurance included in the cost. If anything happens to your vehicle, the insurance would hopefully cover the cost.
If you have a non-maintained novated lease the responsibility of insurance is in your hands. If you don't have the right level of insurance you'll need to pay the costs yourself, including the remaining amount left on the lease.
Novated leases are only available for employees with a salary.
Rebecca Pike is Finder’s money editor, with over 7 years of experience in mortgages and personal finance. A frequent TV and radio commentator, she frequently appears on Sunrise and 7News, Today and 9News, as well as Sky News, Channel 10 and across radio and print. Rebecca previously served as Editor of Mortgage Professional Australia. She has a Master’s degree in Journalism as well as ASIC-recognised certifications in Tier 1 Generic Knowledge and Tier 2 General Advice Deposit Products, which comply with ASIC guidelines.
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