Money For Lunch – Novated Leases – Getting into the Car of your Dreams for Less

Novated Leases – Getting into the Car of your Dreams for Less

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Novated leases provide a cost effective and simple way to purchase and own a vehicle. The good news is that you do not have to earn a senior executive’s salary. You will be able to select a lease term that is suitable for your budget, lease a used or new car, bundle running and finance costs into a simple payday payment and get discounts and tax savings on your vehicle and running expenses. If you are a permanent employee and your employer provides novated leasing, you qualify to apply for a lease.


Novated lease is a term that is used to refer to a vehicle lease that has been novated. This means that the contractual obligations are transferred from one entity to another. Novated lease describes the arrangement for using a car through salary packaging. These agreements constitute leases being novated from employees to employers.

Employees can lease vehicles and these leases are novated in salary packaged leases. The employer takes on the obligations of lease payments. The employee continues using the car according to the original lease terms. Employers also typically pay the rest of the running costs like maintenance, insurance and fuel.

Novated Leases

A three way agreement that is also known as deed of novation facilitates the lease that is novated. This agreement is made between employers, employees and finance companies. The employee who leases the vehicle from the company, the employer and financier all agree that the employer will be responsible for the employee’s obligations.

If an employee is no longer employed by the employer, the novated lease is subsequently renovated back to an employee and the obligations that were taken on by the employer under the lease agreement go back to the employer. Leases can be novated to new employers. All the employer’s obligations cease when the lease term expires.

Salary Packaging

Salary packaging involves an employer entering an arrangement that provides employees with non-cash benefits so as to lower income taxes that the employee pays on the salary while the net benefit is still provided.

Novated leases make it possible to provide the benefit of using a car through salary packaging without an employer being required to actually own the car and also allow the employee to move the car from employer to employer.


The non-cash benefits that are provided to employees are considered to be fringe benefits with employers paying applicable taxes. After the lease is novated the employer pays the vehicle running costs and when the employee uses the vehicle, this is a fringe benefit. The concessional approach to motor vehicles is based on the assumption of some businesses using the provided car although use by the business is not an actual requirement.

Different Novated Leases

Fully maintained novated leases are the most common arrangement for salary packaging. This consists of a finance lease being novated in order for the employer to pay the lease rentals as well as other running costs. A non-maintained lease or novated finance lease is where the novated lease is salary package and other running costs are not paid by the employer.



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