A fully maintained novated lease is a type of vehicle finance where your employer agrees to purchase a car on your behalf, then deducts repayments from your salary. Under a fully maintained novated lease, your employer is responsible for your lease repayments and car maintenance expenses, sourcing the money for this from your salary packaging account.
This can help reduce your taxable income, and potentially allow you to get the car you want when you need it. Your employer will usually let you choose the car you want and then help arrange the financing and insurance you need to secure the car.
How does a fully maintained novated lease work?
Under a fully maintained novated lease, you enter into a three-way agreement between you, your employer and a finance company. You get to choose a car and have your obligations under the lease taken care of by the employer.
The lease rentals and other operating expenses such as service and maintenance, accident management and insurance, are deducted from your pre-tax salary. These payments are made by your employer on your behalf, but the control of the car and its maintenance remains in your hands.
Who can use this type of finance?
A fully maintained novated lease can suit anyone who has a salary package, wants to own a car and drives a significant amount of kilometres each year. The lease allows you to get a new or used car of your choice, which will be sourced for you as part of your salary packaging agreement.
If you don't have access to a salary package, or prefer to source and pay for your own car, this may not be an option for you.
Pros and cons
Pros
Potential tax savings. With a fully maintained novated lease, deductions are made from your pre-tax income, which can help reduce the amount of tax you pay.
Transferrable agreement. A fully maintained novated lease is transferrable if you leave your job. This means the lease can be transferred to the employee or, in some cases, to the new employer.
Complete car management. A fully maintained novated lease offers you cover for all car operating expenses with regular monthly repayments. You can benefit from pre-authorised maintenance service for your fuel, oil and tyres, accident management and other running costs.
Cons
Temporarily lowers your income. You will be sacrificing part of your income for the lease repayments and maintenance of the car. This can leave you with less money for other needs such as rent and food.
Limited availability. Not all employers offer salary packages that allow you to get a fully maintained novated lease. People with no regular income such as freelancers and business owners also won't be eligible for this type of finance.
Form of debt. This type of finance is still technically a form of debt. You should also carefully examine the cost of the car lease, including the tax implications, interest charges and upfront payments that could make the lease more costly.
How to compare fully maintained novated lease options
Repayment flexibility
A fully maintained novated lease that allows you to make manageable, regular payments can make it easier to manage the change in your take-home pay. You may also want to check the potential for additional payments or balloon payments, which could allow you to pay off the car sooner.
Fuel options and discounts
A fully maintained novated lease covers fuel costs, but finding a lease agreement where you get discounted rates on fuel and a choice of fuel stations can make it more affordable for you in the long run.
Covered expenses
Most fully maintained novated leases will cover the vehicle purchase, insurance, registration fees, fuel and other expenses such as accident management and maintenance costs. But it can vary depending on the lease agreement, so make sure you check what's covered and what's not.
Out of pocket costs
The repayments for a fully maintained novated lease come out of your pre-tax income. This means your take-home pay will be lower compared to what it was before the lease agreement. There may also be additional fees for maintenance or transfer of the lease if you change jobs. Make sure you check these costs to decide if this type of car finance is right for you.
Leasing Calculator
When comparing vehicle finance options, it's generally helpful to know what monetary figures you are working with. You could use the calculator below to get an idea of the costs involved.
How to apply for a fully maintained novated lease
A fully maintained novated lease can be an affordable way to buy a car, but it is only available with employers that offer it as part of a salary package. So, first check that this option is available.
If it is, you may also need to provide:
Vehicle details. This includes vehicle make and model, build year, where you want to buy it i.e. dealer, auction, private seller.
Financial details. This includes the lease length you prefer, the vehicle price, and the running. Contact information. This includes your name, address and phone number, name of your current employer and details of your gross salary.
Matt Corke is Finder’s head of publishing ventures. Prior to this he was head of publishing for Australia, New Zealand and emerging markets. Matt built his first website in 1999 and has been building computers since he was in his early teens. In that time, he has survived the dot-com crash and countless Google algorithm updates. See full bio
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