Thinking about a new car and wondering if a novated lease is worth it? You’re not alone. Many working Aussies ask themselves this question when considering their next vehicle. The good news is, a novated lease can be a smart, tax-effective way to get behind the wheel of a new or used car, without the headache of managing all the costs yourself. At Salary Packaging Australia, we often get asked about the details of how novated leases work, which is why we’ve broken down everything you need to know. Read on to learn more about the novated lease pros and cons to help you decide if signing up for one is the right move for you.
What Exactly Is a Novated Lease?
At its core, a novated lease is a financial arrangement between you, your employer, a lease financier, and a lease provider. Simply put, you choose a car, your employer deducts agreed novated lease payments from your salary using pre-tax salary deductions, and the lease provider manages the finance for the vehicle.
Unlike traditional employee-purchasing arrangements, a novated lease allows the car to be for personal use, not just work-related travel. Whether you want a new or used vehicle, a petrol car, or even an electric vehicle, a novated lease vehicle deal can make it easier to afford without stretching your budget.
Salary Packaging Australia offers tailored novated lease solutions, making it easy to drive the car you want while handling all the details, saving you time, and helping you get the most out of your salary packaging.
How a Novated Lease Arrangement Can Save You Money
One of the biggest draws of a novated lease is the potential to save money. By paying lease payments and many running costs with pre-tax income, you reduce your tax bill and enjoy more financial flexibility.
Here’s what can often be included in a fully maintained novated lease:
- Finance repayments
- Fuel expenses
- Servicing and tyres
- Registration
- Comprehensive insurance
- Roadside assistance
By bundling these expenses, you can often save more than if you purchased a car outright or used a standard car loan. Plus, many employers offer novated leasing as part of a benefits package, which can include GST savings on the vehicle purchase price.
Some vehicles may even qualify for FBT exemption, meaning certain fringe benefits tax (FBT) rules don’t apply, further boosting real income tax savings.
The Hidden Perks of a Novated Lease
We’re often asked, is a novated car lease worth it for the perks? Beyond the obvious benefits, a novated lease gives you convenience and flexibility. For example:
- Vehicle running costs are managed in one simple payment.
- You get access to fleet pricing and GST savings through your novated lease provider, often making a new car more affordable than buying it yourself.
- You can select fuel-efficient vehicles or eligible electric vehicles, helping to reduce both environmental impact and ongoing fuel expenses.
- Optional extras like fuel cards or even car washes can be included, making day-to-day life simpler.
Even at the end of the lease, you have choices: purchase the same car you’ve been driving via a residual payment, trade it in, or start a fresh lease.
Things to Consider Before Signing Up
A novated lease from a reputable leasing company can be a great option for many, but it’s worth knowing a few things to make the most of it:
- Your novated lease repayments come from your salary, which can slightly reduce take-home pay, so it’s important to plan accordingly. Your lease and running costs conveniently managed by your leasing company.
- Changing jobs? You’ll need a new employer to continue the arrangement or manage the lease agreement.
- Keep an eye on the lease term and any residual value to stay ahead of costs.
- Not every running cost may be included, so check your plan details.
By being aware of these points, you can enjoy the benefits of a novated lease while keeping your finances on track. Comparing it to a traditional car loan or regular car loan before you make your decision can also help you find the best fit for your needs.
Novated Lease Disadvantages and Advantages
Still wondering about novated lease pros and cons? Here they are at a glance:
| Novated Lease Advantages | Novated Lease Disadvantages |
| Reduce taxable income and enjoy potential tax benefits | Lease payments reduce take-home pay, so budget accordingly |
| Bundle most running costs in one convenient package | Changing jobs may require adjusting the lease arrangement |
| Access new or used car finance without negotiating with dealers | There is a set lease term, which limits flexibility for very short-term needs |
| Option to include petrol, electric cars, or fuel-efficient vehicles | Not all running costs may be included, check your plan details |
| Potential GST savings on vehicle and expenses | End-of-lease decisions (residual value, trade-in) require planning |
| Hassle-free management of registration, insurance, and servicing | Slightly more paperwork than a simple car purchase |
Who Benefits Most from Novated Lease Work Agreements?
A novated lease can be beneficial for many Australians, but it particularly suits:
- Employees with enough taxable income to benefit from pre-tax salary reductions.
- People who want to combine multiple car running costs into one simple package.
- Those looking for a hassle-free vehicle finance option without negotiating with a registered dealer.
- Drivers who want a new car or used car with predictable budgeted running costs.
- Employers looking to retain staff through attractive novated lease offers.
Use a Novated Lease Calculator to See Your Savings
Not sure exactly how much you could save? As the premier provider of novated lease packages, we offer a free novated lease calculator. Enter your car’s details and current running costs, and you’ll get an estimate of potential savings compared to your current setup. This is the easiest way to see if a novated lease is worth your time and money.
Should I Get A Novated Lease With Salary Packaging Australia?
So, is a novated lease worth it? For many Australians, the answer is yes.
By choosing a novated lease through Salary Packaging Australia, you can reduce your taxable income, bundle your vehicle running costs, and enjoy the convenience of a fully maintained novated lease. Beyond novated leases, SPA also offers other salary packaging options, including the Remote Area Benefit, PBI Benefit, Exempt Benefit, Rebatable Benefit, and Minor Exempt Benefits, helping you get the most from your salary while keeping things simple and stress-free. Talk to our team today to see how a novated lease or other salary packaging options can work for you.