Should I refinance or pay my novated lease balloon payment?

Understanding what to do at the end of your novated lease.

Novated leases can be complicated products, but they offer a convenient way for you to finance a vehicle through your pre-tax salary. When it comes to the end of your novated lease term, you may find yourself with a balloon payment and the question of whether to refinance that payment or take out another lease. We show you how to work out the right option for you.

What happens at the end of a novated lease?

This depends on the type of novated lease you choose.

  • Novated operating lease. You return the vehicle for inspection at the end of the lease.
  • Novated finance lease. If the value of the vehicle is less than the residual value, you will be responsible for the shortfall. This results in a balloon payment.

What options do you have?

If you end your novated lease term and you’re left with a balloon payment due to the vehicle being valued at less than the residual value, you have a few avenues you can take. If you’ve saved over the course of your loan term, you can pay the balloon payment in full. If you haven’t saved, you can choose to take out a personal loan to cover the balloon payment, essentially “refinancing” your novated lease. You can also choose to take out another novated lease.

Should you refinance your balloon payment or take out another novated lease?

There is no one answer for this, as it depends on a multitude of factors. By taking these factors into consideration, you can work out which option will be better for your situation:

  • How much is your balloon payment? The amount you have to refinance will affect whether it’s worth refinancing or not.
  • How long are you planning to keep your vehicle for? The length of time you’re planning to keep your car also needs to be thought about. You should consider the age of the vehicle, the amount of the balloon payment and whether it can be repaid in that time.
  • Are you happy with your current vehicle? If you take out another lease, you will be able to get a new vehicle. However, you may want to keep your current vehicle. This is another factor to consider.

Stratton Finance Novated Lease

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Looking to purchase a vehicle through a novated lease? Speak to the experts at Stratton Finance.

  • Lease terms of up to 5 years
  • Purchase any vehicle you like
  • Fixed monthly repayments

Please note that the rates, fees and features mentioned here were correct at the time of publication.

Make use of the tools available to you

When deciding whether or not to refinance, you can use finder.com.au’s tools to help make a better informed decision.

Deciding whether or not to refinance your novated lease balloon payment doesn’t have to be a complicated decision. With the right tools at your fingertips, you can make the right choice for your needs.

Compare refinancing options now

Updated June 27th, 2019
$
Name Product Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Application Fee Monthly Service Fee Monthly Repayment
From 6.99% (fixed)
8.1%
$5,000
1 to 7 years
$295
$10
Finance a range of vehicles including cars, motorbikes, boats and caravans.
Apply online to finance a new or used motor vehicle and receive a response in 90 seconds. You will receive a competitive tailored rate of between 6.99% p.a. to 14.99% p.a.
6.45% (variable)
6.59%
$10,000
1 to 7 years
$100
$0
Apply for a loan up to $50,000.
Benefit from a flexible, variable rate to finance a car up to 3 years old with SCU.
From 5.34% (fixed)
6.6%
$7,500
1 to 7 years
$459.20 (for private seller vehicles this fee is $608)
$8.90
Fixed or variable rates starting from 5.34% p.a.
Apply for up to $150,000 and have up to 7 year(s) to repay. You can use cash or trade in a vehicle to use as a deposit.
5.64% (fixed)
5.99%
$2,000
1 to 7 years
$250
$0
Borrow as little as $2,000 at a competitive fixed rate
Finance a new car up to two years old. Competitive 5.99% p.a. rate available to all approved applicants.
5.69% (fixed)
5.97%
$25,000
1 to 7 years
$175
$0
Offset your interest with a Car Budget Account.
Take advantage of a competitive rate, pre-approval and no early repayment fees when you finance a car under two years old.
From 5.99% (fixed)
6.55%
$15,000
1 to 7 years
$399
$0
Benefit from 5-hour pre-approval.
A competitive rate car loan from RACV with no monthly fees.
8.49% (fixed)
9.67%
$10,000
1 to 7 years
$250
$12
Use a new or used car as security.
A flexible loan thats lets you benefit from a car search tool as well as the option to borrow extra for on-road costs.
From 8.49% (fixed)
9.6%
$3,000
1 to 5 years
$195
$12
You'll receive a fixed rate from 8.49% p.a. based on the value of your car
Get a competitive rate and apply for a larger loan up to $80,000 when you attach a new or used car as security to the loan.
5.49% (variable)
6.41%
$10,000
1 to 7 years
$250
$10
You'll receive a variable rate of 5.49% p.a with a comparison rate of 6.41% p.a.
Borrow from $10,000 to $100,000 for a new or used car with flexible payment options.

From 5.99% (fixed)
6.55%
$5,000
1 to 7 years
$399
$0
You'll receive a fixed rate from 5.99% p. a.
Purchase a new car with this loan and benefit from a fixed rate and no monthly fees. Pre-approval available within 5 business hours.
6.69% (fixed)
7.04%
$2,000
1 to 5 years
$250
$0
Secure this loan with a car and use the funds for any purpose.
Competitive 6.89% p.a. rate available to all approved applicants. Loan amounts up to $60,000 available.
From 7.24% (fixed)
7.8%
$5,000
1 to 7 years
$399
$0
You'll receive a fixed rate from 7.24% p.a.
Finance a used car with NRMA and benefit from a fixed rate term and no monthly fees. Pre-approval available within 5 business hours.

Compare up to 4 providers

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2 Responses

  1. Default Gravatar
    LoraineApril 28, 2018

    I had a novated lease over 5 years that has just finished. At the end of the lease I was reimbursed $12,000, which my pay office taxed. Is the reimbursed amount part of my taxable income for the Year?

    • Avatarfinder Customer Care
      JeniApril 29, 2018Staff

      Hi Loraine,

      Thank you for getting in touch with finder.

      The reimbursed amount should not be part of your taxable income since you mentioned that your office has been taxed for the novated lease.

      You may want to review on types of income you need to declare by checking out this link.

      In addition, this page will help you know more about GST and vehicles purchased under novated leases.

      I hope this helps.

      Have a great day!

      Cheers,
      Jeni

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