Before you take out a novated lease, there are a few key terms and concepts you should understand. One of them is residual value.
What is Residual Value?
Residual value is the estimated value of your car or vehicle at the end of a novated lease. This amount is sometimes called a balloon payment. The dollar figure represents the amount of the vehicle’s original price that hasn’t been paid off during the term of the novated lease. Therefore, it’s the lump sum you will need to pay when the lease ends, if you do want to own the car outright.
How is Residual Value Calculated?
The Australian Tax Office sets the residual percentage, based on the length of the lease term. The table below shows residual by percentage for different periods, starting from 12 months. You can calculate residual value by multiplying the cost of the car by the percentage that applies to your lease agreement, depending on how long it may be.
| Term of Lease | Residual % |
| 12 Months | 65.63% |
| 24 Months | 56.25% |
| 36 Months | 46.88% |
| 48 Months | 37.50% |
| 60 Months | 28.13% |
Is Residual Value Taxable?
The novated lease residual value amount is not taxable. If you decide to sell your vehicle at the end of the lease period for an amount that is higher than the residual value, the profit is tax-free. This is one of the many advantages of novated leases.
What Are Your Options at the End of Your Novated Lease?
Once your lease ends, there are a few ways you can handle your novated lease residual value. It really does depend on whether or not you’d like to keep the car, and what your financial situation is like. In the end, the choice is yours!
Pay the Residual Value and Take Ownership of Your EV
The most effective choice (and maximum commonplace) is to pay the residual quantity in complete. This method you’ll then very own the automobile outright. If you’ve leased an electric vehicle, this is usually a correct funding, due to hastily growing fuel costs and the continued tax incentives that the government offers for EVs.
Sell Your Vehicle
If you don’t want to maintain the car whilst your rent ends, you could pick out to sell the car. Generally while you promote the vehicle you could pocket the income tax loose. This is because the ATO is very conservative with their residual price figures and regularly the car is well worth extra than its residual fee. However this isnt continually the case and it’s far crucial to hold this in thoughts. CarBon also can assist you promote your automobile at the quit of your hire term. In this example, you don’t must worry about paying the residual fee, however you furthermore may received’t be able to keep the car. This is good if you want to keep away from the obligation of promoting the auto, or if you need to improve to some other new automobile right away.
Refinance the Residual Value
You can also pick to refinance the residual cost. That way spreading out the fee over a new lease term and paying it off over the years. This choice is famous for people who want to maintain on to their vehicle but don’t need to pay the lump sum amount proper away. Refinancing can enlarge the lease and come up with more time to manage your price range. It’s a very good choice for some of reasons.
Find Your Perfect EV Novated Lease Today
Finding the proper novated hire is critical, due to the fact not every lease is identical! At CarBon, we provide quite a number dynamic novated lease alternatives for electric powered automobiles. Discover flexible phrases made to fit your state of affairs, best for leveraging tax savings on a large form of vehicles.
Find out more about our novated leases today.
FAQs about Residual Value
Here are a couple of common queries about residual value for novated leases.
What Happens if the EV’s Market Rate is Lower Than the Residual Value?
If the market fee of your automobile is lower than the residual value whilst your hire ends, it is able to be tough to sell the car and cowl the lump sum fee. This scenario could be very not going as you’ll have some years word before your rent ends to make sure you are not on this position. If it’s far looking like you can turn out to be in this situation considered one of our specialists will contact you well ahead to offer you with extra options to keep away from this difficulty.
What Happens if You Don’t Pay the Residual Value?
Either manner the residual value will want to be paid however you’ve got a mess of alternatives at your disposal. You will pay for it your self and hold the auto outright. You can sell the auto your self or get CarBon to sell it for you even as pocketing any residual fee earnings or you may refinance the residual price and maintain using your vehicle. Carbon will constantly try to get an final results that preferably fits you and your situations.