With energy prices rising, switch to a cheaper plan
Compare Prices Now

Novated Lease

Find out how a novated lease works and compare options now.

Stratton Finance New Car Loan logo image


4.44 % p.a.

fixed rate


5.76 % p.a.

comparison rate

Rate dependent on risk profile


We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!

If you’re looking for a way to finance a car, a novated lease lets you use your pre-tax income to cover the cost of the vehicle lease and reduce your tax.

What is a novated lease?

A novated car lease is an agreement between you, your employer and a third-party financier whereby you take out a lease and your employer takes the lease repayments and operating costs out of your pre-tax income. While the responsibility for these repayments is still yours, it is your employer who will make these payments.

There are a number of novated lease companies in Australia, and many traditional lenders will also offer a novated lease option.

What types of novated leases are there?

  • Novated operating lease. This type of lease allows you to use the vehicle for the duration of the lease, and at the end of the lease, you have no further obligations. You also have no further access to the vehicle. The vehicle will be inspected on its return and it must be in good condition, apart from normal wear and tear.
  • Novated finance lease. This type of lease requires you to guarantee upfront the residual value of the vehicle. At the end of the lease term, if the valuation is less than the agreed residual value, then you will be responsible for the shortfall. Note that it will be you and not your employer who will need to pay this.
  • Fully-maintained operating lease. A fully-maintained lease involves all of the vehicle's operating costs being included in the salary package.
  • Non-maintained operating lease. Under this type of lease, you will be responsible for the operating costs of the vehicle, including maintenance and running costs. Only the lease repayments will come out of your pre-tax income.
  • Budgeted finance lease. This is an option offered by some financiers that allow you to budget for your maintenance expenses and set limits for the amount you'd like to spend.

Benefits of a novated lease

For the employee

  • Cost and tax benefits. You can use your pre-tax income to cover some of the costs of the lease. You may also benefit from corporate fleet discount programs that can reduce the retail price of a vehicle.
  • Easy loan management. As the lease payments and, depending on the option you choose, car running costs, come straight out of your salary, you don’t have to worry about budgeting and managing them yourself.
  • Vehicle options. You can finance a range of vehicles with a novated lease, including both new and used vehicles.
  • After-lease sale benefits. If you decide to sell your vehicle after the lease is up, any profit from the sale will be tax-free.
  • No usage restrictions. There are no limitations on the way you use the vehicle, and you can use it for business or personal use as much as you like.

For the employer

  • A way to offer incentives. A novated lease is a way to incentivise employees with little expense to your business.
  • Limited risk. You won’t be responsible for the vehicle if your employee leaves before the lease is up.
  • Not attached to the business. Novated leases are not considered an asset or liability of the business.
  • You don't need to arrange a company fleet. Novated leases are a way for your employees to access discounted vehicle leasing through your company without the burden of your business managing a company fleet.

How does a novated lease work in terms of tax?

One key benefit of a novated lease is that you don’t have to pay GST. As the vehicle is sold to the financier and then leased to you, they are liable to pay the GST on the vehicle, but they are able to pass this GST on to the tax office.

In terms of the other tax options, this depends on the method you choose. There are two methods you can opt for when taking out a novated lease: the Fringe Benefits Tax method or the Employee Contribution Method.

  • Fringe Benefits Tax

When you choose this method, the entire amount of your lease payments is deducted from your pre-tax income, saving that portion of your salary from income tax. However, since your employer is providing you this lease as a benefit, the lease is subject to Fringe Benefits Tax (FBT), which you are responsible for. FBT is calculated using the Statutory Formula method and based on the distance you’re likely to travel during the "FBT year", which runs from 1 April to 31 March.

There is also a "days not available" option which involves your FBT being reduced when your vehicle is unavailable for travel. This may be because your vehicle is in for repairs, you leave your vehicle on company premises or lend the vehicle to an authorised person for a whole business day.

In May 2011, the government introduced transitional rules regarding the calculation of cars using FBT using a standard statutory rate of 20%. Financiers help you track and calculate your ongoing FBT obligations in accordance with ATO guidelines. Most financiers will offer something like a fuel card that can track your fuel usage over the year.

  • The Employee Contribution Method

This method involves both pre-tax and post-tax deductions from your income. There are benefits to this method, particularly if your salary is below $180,000. If you contribute part of your post-tax salary, you can reduce the rate of FBT from 46.5% to your own marginal income tax rate, which might be as low as 30%, depending on your income. This can ultimately reduce the cost of salary packaging your vehicle. This option is available to both fully-maintained and non-maintained novated leases.

How to arrange a novated lease


While there are more tax and monetary considerations when it comes to novated leases, the process is not complicated as long as you choose the right financier. Here is the typical process that you can expect:

  • Step 1. Shop around for a vehicle and get a quote. Ensure that the quote lists all options including projected operating costs, vehicle options and the vehicle cost.
  • Step 2. Estimate how many kilometres you’ll be travelling over the course of a year. You can do this by tracking your usage over a normal week and factoring in holidays and other times when you might use your car more.
  • Step 3. Decide if you want a fully maintained or non-maintained novated lease.
  • Step 4. Contact your company’s financial consultant and discuss your options. Together, you can prepare an estimated salary package, which you can sign when you’re happy with it.
  • Step 5. Compare your novated lease options and apply with your chosen provider.
  • Step 6. Provide your car dealer’s details to your financial consultant so that the Novated Lease Agreement can be prepared and signed.
  • Step 7. Compare your comprehensive car insurance options and apply for your chosen provider. Then get your cover approved by your financial consultant.
  • Step 8. Your financial consultant will organise payment to the dealer, and if you have a fully-maintained novated lease, then they will also organise payment to your insurance provider as well.
  • Step 9. You can collect your vehicle and receive your fuel card from your financier, so you can start using your car.

Frequently asked questions

What types of vehicles can I finance with a novated lease?

There are really no restrictions as to the type of vehicle that you can finance. In some cases, you may even be able to use a vehicle that you are already paying off. Vehicles can also be new or used.

What happens if my employment is terminated?

If your employment is terminated, you may be able to take your novated lease with you to your new employer. You may also be able to continue making repayments directly to your financier, or you may be able to terminate the lease early and pay it out.

How long do novated leases take to establish?

This depends on the financier you go with, although it will generally take approximately two weeks to a month.

Is a novated lease worth it?

This will depend on your financial and employment situation, but a novated lease will help you reduce your taxable income and therefore the amount of tax you pay. If you really need the money you save on tax, then a novated lease could be worthwhile. However, you should also speak to an accountant to determine what your potential savings will be since this will depend on which tax bracket you fall under as well as how much you use the vehicle.

What are the disadvantages of car salary packaging?

While a novated lease may be a suitable option for you, there are a number of potential disadvantages to keep in mind. You will generally need to pay administration fees as part of the lease, and you may also receive a higher interest rate than on a normal car loan. If you change employment during the term of the lease, you may also have to pay additional fees or charges and may have to cancel the lease altogether.

Can you get a novated lease for a used car?

Generally yes. However, some providers may only offer novated leases on new cars or require the used car to be less than a certain number of years old.

Compare car loans

1 - 1 of 1
Name Product Mobile details underline Interest Rate (p.a.) Comp. Rate (p.a.) Rate Type Application Fee Monthly Fee Monthly Repayment
Stratton Finance New Car Loan Fixed, 1 - 7 Years, $10,000 - $300,000
Stratton Finance New Car Loan
1 - 7 Years, $10,000 - $300,000
to 18%
to 19.61%
You'll receive a fixed rate from 4.44% p.a. depending on the lender you are approved with.
Apply for up to $300,000 and use cash or trade in a vehicle to use as a deposit. Optional balloon payment available.

Compare up to 4 providers

Picture: Shutterstock

More guides on Finder

  • Stratton Finance Used Car Loan

    A used car loan with high borrowing amounts and both secured and unsecured options.

  • CarClarity Car Loan

    Find the best car loan for your circumstances with CarClarity. Rates start from just 3.35% p.a. and borrowers can apply for loans from $10,000 to $250,000 for new and used cars.

  • Great Southern Bank Fixed Rate Car Loan

    If you’re in the market for a new car, the Great Southern Bank Fixed Rate Car Loan may be able to give you the funds you need. With the security of a fixed rate and flexible repayments, this loan might be what you need to own your new set of wheels.

  • Car loan statistics 2021

    Finder research shows 2.7 million Australians have a car loan. Find out how much Aussies are borrowing, and how this has changed over time.

  • Alex Car Loan

    Opt for an Alex car loan and receive a personalised interest rate from 6.95% to 19.99%. Alex's car loans have no ongoing fees and are available from $2,100 to $30,000.

  • Toyota RAV4 car loans

    Compare car loans and discover prices and specs of the Toyota RAV4.

  • Stratton Finance caravan loan review

    Apply for a caravan loan with finance broker Stratton Finance and receive an interest rate from 5.49% p.a.

  • Stratton Finance boat loan review

    Stratton Finance's boat loans range from $10,000 to $200,000 with rates from 5.99% p.a. Secured and unsecured options available.

  • OurMoneyMarket Car Loan

    Get a loan for a new or used vehicle from $2,001 to $75,000. Rates start at just 5.35% p.a. and loan terms vary from 1 to 7 years.

  • Upcoming hybrid and electric car comparison

    Compare soon-to-launch electric and hybrid cars.

Car Loan Offers

Important Information*
Logo for IMB New Car Loan
IMB New Car Loan

You'll receive a fixed rate of 4.88% p.a.
A low minimum borrowing amount of $2,000 that you can use to purchase a new car or one up to two years old.

Logo for Beyond Bank Low Rate Car Loan "Special Offer"
Beyond Bank Low Rate Car Loan "Special Offer"

You'll receive a fixed rate of 4.69% p.a.
Take advantage of a competitive rate, pre-approval and no early repayment fees when you finance a car under two years old.

Logo for RACV New Car Loans
RACV New Car Loans

You'll receive a fixed rate from 5.99% p.a.
A larger loan of $5,000 or more to help you buy a new or used car. 5-hour pre approval available and no ongoing fees.

Logo for NRMA New Car Loan
NRMA New Car Loan

You'll receive a fixed rate of 5.99% p.a.
Purchase a new or used car up to 2 years old and benefit from a fixed rate and no monthly fees. Pre-approval available within 5 business hours.

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.

2 Responses

  1. Default Gravatar
    NitinSeptember 16, 2018

    Your credit scoring system show I’ve got a score of 710, my company is offering a novated lease through a fleet company. My concern is that I won’t get approved because on another free credit site my score is low.

    Do leasing companies do credit checks? I’m confused because of the 2 different scores I’ve got.

    • Avatarfinder Customer Care
      JeniSeptember 16, 2018Staff

      Hi Nitin,

      Thank you for getting in touch with finder.

      There are 4 major credit reporting agencies in Australia with different scoring system – Experian, Equifax, Tasmanian Collection Service and Dun & Bradstreet.

      We obtain a user’s credit score from Experian. If you got a low score from the other reference that the fleet company got, it is best to ask which credit reporting agency was that from and check your credit history to verify the result.

      Leasing companies don’t do credit checks however they use their selected credit reporting bureau as reference for loan applications.

      I hope this helps.

      Please feel free to reach out to us if you have any other enquiries.

      Thank you and have a wonderful day!


Go to site