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The main purpose of this value is to determine how much the vehicle will depreciate over the period of lease. The Residual Price is the expected value of the car at the end of the lease. The residual value is calculated by multiplying the cost of the vehicle by the applicable percentage according to your lease term. The next biggest negotiable term after your Capitalized Cost in your lease is Residual Price of the vehicle. The residual value is set by the Australian Tax Office and is shown in the scale below. As such, vehicles usually sell for more than the residual value. The ATO minimum is generally a very liberal value, when compared to most sales values of vehicles at lease end. The intent of the Residual Value is to reflect a likely market value at the end of the lease term. The ATO provide a scale of Residual Value ‘minimums’ (these are not set in stone in fact). The residual value, also known as a balloon payment, is the payment required by the Australian Tax Office at the end of a novated lease term. The key fact to understand here is that the Australian Tax Office set the residual guidelines for all vehicle and asset leasing in Australia. When customers reach out to us for a quote, we are often asked “‘Why does my novated lease have a residual?”.Ī novated lease has to have a residual value at the end of the lease due to the Australian Tax Office (ATO) based legislation.
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You will enjoy great fleet discounts, GST savings and a reduced taxable income, along with the convenience of a single payment for all vehicle expenses. Novated leasing is a salary sacrifice arrangement, which means your vehicle and associated running costs are bundled into a single payment, which is deducted from your pre-tax salary.
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#Car residual value drivers#
Customers can take out a personal loan, take out a car loan, or pay cash, but many Australian drivers are enjoying the bigger savings and getting into their next vehicle with a novated lease.įor buyers looking to smooth their budget and save on tax, novated leasing is a great alternative. When it comes to purchasing a car, customers are spoilt for choice in the way that they can purchase.