What is a Fully Maintained Novated Operating Lease?
So far we've looked at the definitions for Novated Finance Lease and Fully Maintained Novated Lease. In this article we are going to look at what a fully maintained novated operating lease is.
Under this type arrangement, you (as employee) will enter into an agreement with one of Australia's many novated vehicle lease providers and also with your employer. Under the agreement, you will gain access to a motor vehicle while your employer agrees to deduct the lease payments from your pay each month.
Being fully maintained means that running costs like registration, insurance and servicing are included as part of the monthly payments. And being an operating lease means you don't carry any of the risk related to the residual value of the vehicle. You simply hand the car back at the end of the agreed period. From the research I've done, it seems that the term offered can vary between 1 and 5 years. However this seems to vary from one provider to another.
Most of the material I read seemed to indicate that this was the best of everything - fixed term, fixed price, operating costs included and no risk with the residual value. But what I also read (and what much of the material doesn't point out) is that this can be a more expensive option.
The reason is (and it makes perfect sense if you think about it) because the leasing company is carrying the risk of what the value of the car is at the end of the term. You don't have to worry about it, but they do. So they build in a risk premium to cover any potential shortfall between the residual value and what they can actually sell the car for.
So if you are seriously thinking about taking up the option of a fully maintained novated operating lease, I would suggest you get some independent advice when you do your car lease calculations.
Fully Maintained Novated Operating Lease
