Driving The Right Deal – 4 Key Elements of a Successful Novated Leasing ProgramFor your employees
As an Australian HR professional, you will know the importance of providing a credible, proven and high-performing benefits program for your staff. But how do you really know if the novated leasing deal you’re negotiating is great or not?
Many HR professionals will only know the right questions to ask because they’ve had a bad experience with a novated leasing provider in the past. But it doesn’t have to be this way.
The following four questions are the essential ingredients to driving the right deal and making sure your benefits program does not turn into an HR headache.
1. Do your employees pay for insurance extras they don’t want or need?
A number of providers make a lot of money from vehicles by building in additional extras, such as after-market insurances – often not requested. By not specifically disclosing every cost element in the quote, these extras can be hard to spot.
Employees have to ask themselves, ‘Am I being charged tyre rim insurance?’ or ‘Am I being charged for a protection pack?’ and so on. They need to be able to isolate these extras in their contract and then ask the provider to remove them, if necessary.
Industry regulators are cracking down hard on this practice of surreptitiously adding extras, and rightly so. Investigations began with the dealer networks but they are looking at the novated industry as well. Anyone negotiating novated leasing programs for employees should be aware – and seeking to exclude – such items from their agreements.
Regardless, whoever you choose as your provider, make sure you perform your due diligence so you know your employees are in good hands.
2. Do you know the exact interest rate that is charged, and is it fully disclosed on the quote?
There should be an agreed interest rate for your benefits program, and it should be displayed clearly on all quotes for your staff. But, unfortunately, some providers may not even disclose the interest rate as part of the quote.
If you are an individual making a financial decision on a loan – which is essentially what your employee is doing when they undertake a novated lease – how can you calculate your costs if the interest rate is not included? It is impossible.
You can make sure your employees are not left in the dark by insisting that all quotes must include the interest rate, and that this rate is standard for all staff.
3. Do the fees and margins you negotiated with your supplier always flow through to your staff? How do you manage potential price creeping?
As well as the agreed interest rate, a master contract between you and your novated leasing provider should include any fees and lending margins that may apply. Rather than be a minefield of fine-print and confusion, this fee structure should be simple to understand.
Make sure all possible fees are disclosed and agreed upon by you, up-front, in the master contract. In other words, no surprises.
You are well within your right to ask your provider to supply in writing every detail of the fees to be charged, and that these fees apply across the board to all the employees who take on a novated lease. This will make it simple to monitor over time, and to ensure agreed fees only are being applied.
4. Are volume buying discounts passed on to make the benefit greater?
Make sure your provider is negotiating volume buying discounts on car purchases and all associated running costs, and that these benefits are then being passed onto your staff as part of their lease.
Some providers may pocket the lot, and both you and your staff will be none the wiser. These discounts on purchase price and car maintenance should be part of every novated lease to ensure the true benefit is realised.
The no-nonsense summary
- Ensure your employees can opt out of any insurance and extras, and they know to look for such extras in their quote and contract.
- Ask for absolutely all fees and interest rates to be defined and included in your master agreement, without exclusion.
- Be confident your employees will be getting a comparable deal based on the same interest rate and there is no ‘tinkering’ of contracts.
- Ask how the provider’s consultants are being incentivised (commissions or otherwise) to ensure offers or deals are consistent for all your employees.
- Check that volume buying discounts are being included in your staff leases to ensure real value in the benefit.
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