Andrew Kerr from InsideEDGE has seen a 22% increase in novated lease inquiries over the past year with much of the increase related to potential electric vehicle leasing.
“A lot of our marketing campaigns at the moment are around electric vehicles because it’s such a good opportunity,” he says. (If the annual savings on a traditional novated lease was $3,000 per annum under the new Electric Vehicle FBT free legislation that average savings has now increased to $9,000 per annum.)
InsideEDGE has about 2,000 leases under management and has established a strong market presence in the retail sector with a national focus.
Andrew says there will be a number of important trends impacting the novated leasing sector in 2024. One of them is the growing significance of the agency model used by OEMs to sell cars. Andrew says the growth in the agency model levels the playing field between big and small novated leasing companies because the purchase price of cars will increasingly be the same for all novated lease players.
The rules have changed.
“The big boys used to get buying advantages and additional income streams on car purchases but that’s no longer available because you are dealing with Mercedes Benz head office or Honda head office – you are not dealing with a dealer. “That levels the playing field a little bit. Tesla has set the set the benchmark in that regard. If you want a Tesla, you buy it through their website, and that’s the price.”
Rising finance costs are another important factor for consumers in 2024, he says.
Embrace the 10%!
“There is a little bit of a psychological barrier at 10 percent at the moment. If I tell you, your lease is at 8.75 per cent and then it goes to 9.25 per cent you’re not so fussed but if it goes from 9.75 per cent to 10.25 per cent then that’s a bit of a psychological barrier.
“The important point to remember is that with novated leases is that your interest rates is always going to be slightly higher than your mortgage rate, but you’re paying for it with pre-tax dollars, so it makes it cheaper,” he says.
Andrew says InsideEDGE operates on smaller profit margins than most of the big industry players. It is transparent about the finance rates being charged to potential clients. “We tell people what the interest rates are, we educate them as to how it works so there are no nasty surprises,” he says. Car supply issues will remain a factor, he says. However, it is getting easier.
Andrew says he has been seeing an increasing number of consumers walking away from retail car orders for instance because of changed economic circumstances. But this provides an opportunity for nimble players such as InsideEDGE which via their strong dealership relationships can place the cars with “novated lease” customers who were expecting a longer wait time on vehicles.
Devil is always in the details.
Mr Kerr says he watches the progress of new entrants to the novated lease sector closely. While he takes them seriously, he says a number underestimate the work required to educate potential novated lease customers on how it works and how to achieve the best outcome and therefore have failed to achieve material traction.
“It’s important to remember novated leases are not new. They have been around since 1986, and while the benefit is significant, people have to understand how it works before they will sign up.”