What Is a Novated Lease?

As of 2018, there were over 19 million vehicles registered in Australia. Australia’s population was just over 25 million people that same year. This means that there is one registered vehicle for three-quarters of the country’s population, which underscores the importance of motor vehicles in Australia. There are many remote areas where public transportation is unable to meet the needs of residents. Motor vehicles are also used to transport goods or provide services.

You can opt to buy a vehicle or lease it. In addition to standard leasing options, Australians can also have a novated lease.

Novated Leases

A novated lease enables you to choose a vehicle that you can use and operate for a fixed period of time. The cost of the lease is deducted directly from your salary so that you do not need to worry about making payments yourself. You can opt to have your novated lease last for one year or you can extend it to last for as long as five years. Novated leases can be used to lease a new car or a used vehicle.


The finance company that authorizes your novated lease is the owner of the vehicle you are driving. This means that you do not own the vehicle at the end of your leasing term. At that time, you have the option to buy the vehicle from the finance company or to enter a new novated lease agreement for a different vehicle.

What Novated Leases Include

Novated leases include the cost of the vehicle. Relevant delivery charges and stamp fees are also included in the novated lease cost. You will not need to worry about out of pocket costs for roadside assistance or vehicle repairs with a novated lease. These costs, as well as the costs of fuel, maintenance, and tires, are included in novated leases. Your vehicle registration costs are also covered.

Auto insurance is also included in the cost. It may be possible to retain your insurance company when you enter your lease.

What Isn’t Included

You may incur additional operating costs if you have to pay tolls or receive a speeding or parking fines. These expenses are not included in your lease.

Your lease can be affected by job loss because your lease payments are withdrawn from your salary by your employer. Employers are not responsible for making those payments if you lose your job. Car Insurance and novated lease insurance options should be carefully reviewed when you are establishing your novated lease agreement. You can compare car insurance with iSelect to ensure that you have the appropriate auto insurance coverage you need, and refer to iSelect to determine the best lease insurance protection plan option. With novated lease insurance protection, the costs of your lease can be covered for as long as six months following your job loss.

Arranging a Novated Lease

You have two primary options for how to enter a novated lease. One is to visit a dealership that offers novated leases, where they will help you select a vehicle. Once you have agreed to a vehicle and negotiated the sale price, the dealership’s team will work with your employer to set up the novated lease payments. You may need to check with your employer before visiting a dealership to ensure that they will authorize a novated lease with that company.

You can also opt to work with a finance company. These companies work with approved dealerships to help you locate the specific type of vehicle that you would like to lease. They can help negotiate the price of the vehicle. Once you have had a test drive and agreed to the lease, the finance company works with your employer to finalize the payment arrangements.


A portion of the cost of a novated lease is deducted from your salary before income taxes are applied. As a result, you will pay lower taxes. You will also be eligible for discounts on the cost of the vehicle because a novated lease ensures direct payments from your employer. You will save the cost of the 10% goods and service tax (GST) because you are not purchasing the vehicle.