Buying a car is a big decision and you want to make sure that you’re doing it the right way. Using salary sacrificing to buy a car can have huge benefits to the right person so why not explore whether it could be the right option for you?
What is salary sacrificing?
This is a finance option that allows you to pay for your car from your pre tax salary – this reduces the amount you pay in taxes as well as making your repayments automatic.
Salary sacrificing gets it name from the fact that you are ‘sacrificing’ part of your salary for another benefit – in this instance, paying off your car finance.
Can I do salary sacrificing to buy a car?
It will depend on your employment status, and your employer. You’ll need to be in a job where your employer is happy to enter into a salary sacrificing agreement with you.
Your employer needs to be happy taking on responsibility of setting up the arrangement as they are responsible for ensuring that the repayments are taken out of your pre tax salary each month on the correct date.
What are the benefits of salary sacrificing to buy a car?
Known as a fringe benefit, salary sacrificing can have many benefits to you overall when deciding to buy a car.
The key benefit with salary sacrificing is that it will reduce your pre tax income (because the repayment is taken out of your salary before tax). The higher your income and tax rate, the higher your saving could be with salary sacrificing.
If you decide to buy a new car through a novated lease, you may also be able to enjoy a vehicle that is GST free.
You don’t need to worry about budgeting each month and remembering to make repayments. The repayment costs will be fixed and the total amount will be taken from your pre tax income – giving you one less thing to remember each month.
Many people worry about not having a deposit if they’re trying to buy a car. With salary sacrificing, you won’t need a deposit as you’ll be making lease payments over a period of time instead.
With a novated lease option, you won’t face unexpected fuel, running and maintenance costs. Generally, a novated lease agreement will income fuel and servicing costs – although you’ll probably have a limit on these so make sure you’re aware of it.
How do I start salary sacrificing to buy a car?
Start the process today by speaking to your employer about salary sacrificing as an option for you when buying a car. Do your sums and understand whether it will work for your situation.
Article Provided by Positive Lending Solutions