The majority (70%) of Australian businesses and 82% of SMEs with five or more employees or more say they would swap company cars for novated leases as rising labour costs and skyrocketing inflation sparks growing concerns, according to research commissioned by Small Business Loans Australia.
Novated leases are a salary packing offering by businesses that allows employees to lease a new or used car that they pay off through their pre-tax wages.
When Small Business Loans Australia compared responses across the states, it found that NSW, South Australian and West Australian businesses are the most likely to encourage staff to opt for novated leases, at 77%. Queensland is the only state to buck the trend, with 42% there preferring company-paid vehicles over novated lease arrangements.
The cost-saving tactic is more embraced by the nation’s largest SMEs, with the survey revealing 84% of companies with 200 or more employees would opt for novated leases. Micro businesses of between one and four staff the least enthusiastic, with just 50% saying they would eschew company cars.
More than two-thirds of survey respondents (69%) say their teams would love to have a car through a novated lease arrangement for their personal and work use, with South Australian businesses particularly optimistic about staff taking up the offer of novated leases over company cars, at 77%.
Queenslanders are the least enthusiastic, with just 58% of businesses believing their employees would embrace the option, followed by 59% of West Australians. Almost seven in 10 Victorian SMEs (69%) say their teams would love them.
Across all SMEs, 82% of medium-sized businesses with between 20 and 199 staff say employees would accept novated lease arrangements through salary packaging, with micro businesses with small businesses less sure, at 54%. Despite being on the fence about opting for novated leases, 62% of micro businesses believe their team would want them, with 78% of large businesses saying yes.
Small Business Loans Australia founder and managing director, Alon Rajic said, “Novated leases are a win-win for SMEs and employees: with 69% of all survey respondents saying employees would take up novated leases if they offered the option, we can see the widespread appeal.
“Given the growing concern when it comes to rising costs, it’s also small surprise novated leases are on the rise – particularly for larger companies where the switch from company cars could save a larger operation hundreds of thousands of dollars.
“For employees, this is almost equally enticing. The price of cars skyrocketed over the past few years as pandemic-fuelled supply and demand issues. It’s easy to see why novated leases offer a cheaper alternative than buying a new car outside of a salary packaging arrangement.”
Alon adds that an employee then has an option to either pay the residual amount left on the car at the end of a typically five-year lease or hand it back for a new model.