This article is part of our “being smart with your salary” series, a series of articles created to provide simple and easily understood answers to many frequently asked questions about Salary Packaging. For a simplified discussion or quoting on Salary Packaging that is easier to comprehend, contact Motor Vehicle Solutions on (03) 9682 7580.
Salary Packaging can initially be a confusing process. Some Salary Packaging companies can try to use their customer’s lack of understanding to their advantage and increase their profits. By understanding the Salary Packaging process, and especially by understanding Salary Packaging quotes, you can fully understand exactly what you are and are not paying for in your Salary Packaging agreement.
Addition of insurances and warranties on an opt-out basis:
Many Salary Packaging companies can make significant profits through selling their customers extra insurances and warranties. Many of these companies add multiple extra insurances to your quote on an opt-out basis, resulting in many customers unknowingly paying for insurance products they do not need or want.
While the inclusion of products such as comprehensive vehicle insurance and roadside assistance can be useful and often necessary, there can be many other insurances automatically added in to your Salary Packaging quote. These include: extended warranty, aftermarket paint and interior protection, loan protection insurance, small damage insurance, tyre and wheel insurance, total assist insurance, and more. If customers do not ask for these to be removed, they can be paying for multiple insurances they don’t want.
No breakdown of individual prices for each item:
Instead of clearly displaying the price being paid for the vehicle, many Salary Packaging customers will misrepresent the price to the customer by displaying the FBT base price. This is not the full purchase price of the vehicle, as it does not include the government on-road charges (such as stamp duty, registration and CTP insurance) that can easily add up to thousands of extra dollars that must be paid. On some Salary Packaging quotes it is not immediately apparent to customers that these costs are not included in the price listed.
Many Salary Packaging companies do not display individual prices for each insurance and warranty product included into their quote. Many bundle the cost of these items in with other expenses into subcategories such as “maintenance costs”. This can make it hard for customers to compare the pricing of these insurance items to prices received elsewhere, and to ensure they are getting the best value for money on any insurances and warranties they purchase.
A combination of these tactics that can be used by Salary Packaging companies can result in customers unsuspectingly paying thousands of dollars more than they realise.
As an example of how these tactics can be successfully used against an uninformed customer, who had been quoted an ‘FBT base price’ of $45003.50, and was under the assumption this was the final price of the vehicle as they were never advised that there were any further costs. The customer was under this assumption until it was pointed out to them that deep in the terms and conditions of the contract, it said that the total amount financed for the vehicle would be $53232.80.
Understanding the way that Salary Packaging companies quote, and understanding the terms that they use during the quoting process can ensure that customers receive the most benefit possible from their Salary Packaging agreement.
Are you being smart with your salary? For more un-complicated answers to your Salary Packaging and Novated Lease questions, call Motor Vehicle Solutions on (03) 9682 7580 or CLICK HERE to discuss how you can get the most out of your Salary Packaging agreement.