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Novated Leasing: It’s Worth It!

The short answer is Absolutely !!!

Then they ask, what is it?

A novated lease is an agreement between your employer, a finance company and yourself.

When you choose the car you want, you then enter into a finance agreement in your own name. Then you, your employer and the finance company all sign a novation agreement. A key item here is that some lease companies will allow an employee to “finance” their existing vehicle or a pre-owned vehicle. You choose the car you want.

Your employer will make the monthly lease payments to the finance company, and you can use the vehicle as part of a salary packaging arrangement. With that agreement, most of the lease, running costs of the vehicle and fringe benefits tax (FBT) are deducted from your pre-tax salary. Your income tax is then calculated on your reduced salary, which will usually increase your net disposable income.

Benefits to you, the Driver.

Tax free running costs.

Unlimited personal use.

Up front budgeted motoring

Fully managed car ownership

Fuel Card

Income maximisation.

Your company makes your monthly payment for you

Benefits to Employer.

Payroll Tax savings on every dollar spent.

Employee is in a safe late model insured roadworthy car.

Employee has no bills to pay

One touch payroll activation

Helps build Employee Morale.

No cost implementation

Fully Managed Novated Leasing is the last employee personal use tax saving options currently offered from the ATO.

Effectively this means that a purchaser doesn’t actually buy a car, it’s financed and done so by packaging a salary in a way that payments to cover the costs of the lease come out of the salary before the taxation office get their slice. And by effectively lowering the amount of salary received, the tax bracket the salary slots into can be lower and/or have a lower rate of tax applied, which can mean the after tax pay is better.

There are some immediate benefits to the driver

The car can be for private use only, or a combination of work and play. A payment structure for the lease can be worked out so running costs such as fuel, insurance, new tyres, are all a 100% pre-tax payment.

GST is saved too, as having a novated lease means motoring costs are GST free for employees.

A company such as Fincar can assist in helping you with an obligation free quote for you and your company. Call 1300 346227


  1. Mark Leahy says:

    I am interested in acquiring a new car, financed under a novated lease. I have previously done this 10 years ago, then the lease was arranged by my bank. Looking at other options now. Can you help me? The vehicle is likely to be a new Isuzu MU-X valued around $45000.

    December 4th, 2020 at 10:52 am

  2. Johan says:

    It is an easy and quick way of getting a vehicle in front of your house door, often of higher value than you would have bought if paid directly or via a low interest bank loan. The novated lease company is very coy on the %% you pay for your car loan. And do not forget that these novated lease companies have a lotb of staff and that money comes from somewhere. I did it for years, made very detailed calculation and over 4 years you pay 2000 $ more for a novated lease car than compared to asking your bank for a low interest personal loan.
    I bought my leasecar after 4 years and am happy that the monthly pre- and after tax deductions are gone from my salary.
    Mind you: I am in a higher tax bracket, thus profit more from lowering my taxable income. If you are in the low tax bracket a Novated Lease car becomes a very expensive game.

    December 4th, 2020 at 11:41 pm

  3. Ian Finch says:


    My wife works at Ymca and gets around $1000 a week. She thinks she can get salary packaging as the “Y” is a charitable organisation. We don’t really know how this Novated Lease works. How do we know what price range she needs to work within? In other words how do we find out what type of car we can or can’t get and what is the maximum/minimum price we can work with?



    December 8th, 2020 at 9:27 am

  4. Dave Conole says:

    Ian, your best bet would be to ring the office direct and discuss with one of the great staff.

    December 13th, 2020 at 2:12 pm

  5. Wayne Dossetto says:

    Are you sure the FBT is deducted form pre-tax salary?

    January 23rd, 2021 at 11:19 am

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