How Does Novated Lease Work?


Novated LeaseNovated leasing might be a bit complicated to understand, especially if this is the first time you have encountered this term. Also known as “salary packaging a car,” this means that your lender will deduct the car payments from your salary prior tax.

How does it work?

According to Cars Guide, a normal novate agreement is agreeable upon two to five years where you can trade your car for a newer model or you can do a “balloon” payment and keep the car. If you are still wondering about the difference between a regular car loan and a novated lease, keep in mind that a regular loan requires you to pay post-tax.

What are the benefits for employees?

To start, you can stretch your dollars with this kind of payment scheme because your lender will charge you pre-tax from your salary. Lease Masters added that this gives you flexibility when it comes to the type of vehicle you truly want to drive. More importantly, when you choose novated leasing, you don’t have to give the car back to your employer when you switch jobs. The contract is transferable to your new employer or under your name if you wish.

What are the benefits for employers?

While novated leasing directly benefits employees, employers will also find it advantageous. This kind of salary packaging can stretch your employee’s salary income with little to no cost to your company. This will also give you the chance to offer your employee’s their choice of cars without being left with excess or unwanted vehicles if they choose to leave or transfer to another job.

Novated lease is a common vehicle lease popular in Australia. According to the Australian Taxation Office (ATO), this lease is doable between you and a leasing company or tripartite agreement among an employee, an employer and a finance company.

To be able to get the best deals, using novated lease Australia calculators can determine the right kind of package for you. There are many finance companies for you to choose from. All you have to do is determine the right fit.

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