Should I refinance or pay my novated lease balloon payment?

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

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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.

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

$
Name Product Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Application Fee Monthly Service Fee Monthly Repayment
IMB New Car Loan
4.99% (fixed)
5.34%
$2,000
1 to 7 years
$275.12 ($250 Application fee + $25.12 PPS registration fee)
$0
You'll receive a fixed rate of 4.99% p.a.
A low minimum borrowing amount of $2,000 that you can use to purchase a new car or one that's up to two years old.
Plenti Car Loan
From 4.89% (fixed)
5.44%
$2,001
3 to 7 years
from $249 to $799
$0
You'll receive a fixed rate from 4.89% p.a.
Borrow up to $100,000 with a Plenti Car Loan and benefit from no early repayment or exit fees.
Loans.com.au - New and Dealer Used Car Loan
From 4.67% (fixed)
5.22%
$5,000
3 to 5 years
$400
$0
You'll receive a fixed rate from 4.67% p.a. based on your risk profile
Finance a new car and benefit from features such as fast approval, no ongoing fees and an optional balloon payment. Settle the loan before 30 November 2021 and enter the draw to win a $1,000 fuel gift voucher. T&Cs apply.
Wisr Secured Car Loan
From 4.74% (fixed)
5.01%
$5,000
3 to 7 years
$195 for refinance and dealer sale ($245 for private sale)
$0
You'll receive a personalised interest rate from 4.74% p.a. to 16.01% p.a. based on your risk profile
A flexible car loan from $5,000 - $63,000 with personalised rates and rewards for strong credit customers.

⭐Special Offer: Wisr's standard establishment fee $605 will be reduced to $195 for applications submitted through Finder. T&Cs apply.
Stratton Finance New Car Loan
From 3.85% (fixed)
4.05%
$10,000
3 to 7 years
$700
$8.25
You'll receive a fixed rate from 3.85% p.a. depending on the lender you are approved with
Apply for up to $250,000 and use cash or trade in a vehicle to use as a deposit. Optional balloon payment available.
Credit Concierge Car Loan
From 3.35% (fixed)
4.41%
$10,000
1 to 7 years
$350
$8.50
You'll receive a fixed rate of 3.35% p.a. with a comparison rate of 4.41% p.a.
Get access to over 20 providers to fund a new or used car.
NRMA New Car Loan
From 4.99% (fixed)
5.69%
$5,000
1 to 7 years
$499
$0
You'll receive a fixed rate from 4.99% p.a.
Purchase a new or used car up to 3 years old and benefit from a fixed rate and no monthly fees. Pre-approval available within 5 business hours.
OurMoneyMarket Car Loan
From 5.35% (fixed)
5.65%
$2,001
1 to 7 years
$250
$0
You'll receive a fixed interest rate from 5.35% p.a. to 14.99% p.a. based on your risk profile.
Borrow between $2,001 and $75,000 to finance a new or used car up to 10 years.
NRMA Used Car Loan
From 6.24% (fixed)
6.94%
$5,000
1 to 7 years
$499
$0
You'll receive a fixed rate from 6.24% 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.
RACQ Bank Car Loan Special
5.49% (fixed)
6.16%
$3,000
Up to 7 years
$395
$0
You'll receive a fixed rate of 5.49% p.a.
Borrow up to $60,000 for a new or used car and get a range of membership benefits.
Symple Loans Personal Loan
From 5.75% (variable)
6.47%
$5,000
1 to 7 years
from 0% to 5% of the loan amount
$10
You'll receive a personalised interest rate from 5.75% p.a. to 25.99% p.a. based on your risk profile
Borrow up to $50,000 to pay for what you need.
RACV New Car Loans
From 4.99% (fixed)
5.69%
$5,000
1 to 7 years
$499
$0
You'll receive a fixed rate from 4.99% 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.
RACV Used Car Loans
From 5.49% (fixed)
6.19%
$5,000
1 to 7 years
$499
$0
You'll receive a fixed rate from 5.49% p.a.
Benefit from no ongoing fees, 5-hour approval and a 21-day satisfaction guarantee. Interest rate discounts for members.
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Compare up to 4 providers

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Car Loan Offers

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

You'll receive a fixed rate of 4.99% 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 4.99% 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 4.99% 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.

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2 Responses

    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’ve mentioned that your office has been taxed for the novated lease. You may want to review ATO’s guide on types of income you need to declare.

      In addition, ATO’s full or split full novation guide 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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