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What Is a Novated Lease?

A novated lease is a popular way for Australian employees to finance a car using their pre-tax income through salary packaging. It’s a three-way agreement between you, your employer, and a leasing provider.

Under a novated lease, your employer makes the lease payments on your behalf from your salary. This reduces your taxable income and may lead to significant savings over time.

The vehicle can be new, used, or even electric — and many lease packages also bundle running costs like fuel, rego, servicing, and insurance.

 

How Does a Novated Lease Work in Practice?

A novated lease works by allowing you to lease a car while your employer handles the payments using your pre-tax salary. Here’s a step-by-step look:

 

Step 1: Choose your vehicle

You can pick a new or used vehicle — and increasingly, electric vehicles (EVs) are becoming the smart choice thanks to recent tax incentives.

 

Step 2: Get a novated lease quote

At Fingo, we offer instant access to our novated lease calculator, so you can estimate your repayments, tax savings, and bundled running costs.

 

Step 3: Employer approval

Your employer agrees to participate in the lease arrangement. We work directly with them to manage deductions and ensure compliance.

 

Step 4: Lease setup

The finance provider purchases the car and enters a lease agreement with you. Lease terms generally run between 1 to 5 years.

 

Step 5: Drive and save

You enjoy the car while your employer deducts regular payments from your pre-tax salary. Running costs (fuel, insurance, rego, servicing) can be included.

 

Step 6: End-of-lease options

When the lease ends, you have a few options:

  • Pay the residual value and own the car
  • Refinance the residual and continue leasing
  • Upgrade to a new vehicle
  • Hand the car back (subject to lease terms)

 

What Are the Benefits of a Novated Lease?

Novated leasing can offer a wide range of financial and practical benefits:

  • Tax savings: Lease repayments come from your pre-tax salary, which can reduce your taxable income.
  • GST savings: You won’t pay GST on the vehicle purchase price.
  • Bundled costs: Running expenses like insurance, fuel, servicing and rego can be packaged into a single payment.
  • Discounted pricing: You may get access to fleet pricing or corporate discounts.
  • Flexibility: Choose a car that suits your lifestyle — including EVs.
  • Convenience: No large upfront payment or lump sums to worry about.

 

What Should You Consider Before Getting a Novated Lease?

Novated leases aren’t for everyone, and it’s important to weigh up the following:

  • You need employer support: Not all employers offer novated leasing.
  • You don’t own the car straight away: The vehicle is leased, and ownership is only possible after paying the residual at the end of the lease.
  • Fringe Benefits Tax (FBT) may apply: Depending on your vehicle and usage, FBT can impact the total cost and tax savings.
  • Leaving your job may complicate things: If you switch employers, you may need to transfer the lease or pay it out.
  • Not available to sole traders: Self-employed individuals usually can’t access novated leasing, but give us a call, and our novated lease specialist may still be able to help set one up for you.

 

How Much Can You Save? Real-World Examples

 

Example 1: Traditional vs Novated Lease

Liam earns $85,000 annually. He leases a $38,000 vehicle with running costs included.
 With a novated lease, he saves around $3,200 in tax per year, compared to taking out a personal car loan.

 

Example 2: EV Novated Lease with FBT Exemption

Sarah chooses a Tesla Model 3 for $65,000. Because it qualifies for the EV FBT exemption, she pays no fringe benefits tax and saves over $7,750 in total lease costs annually.

 

Who Is Eligible for a Novated Lease?

You may be eligible if:

  • You’re a full-time or part-time employee with a consistent salary
  • Your employer offers salary packaging
  • You are not self-employed or a sole trader

 

Novated Lease vs Car Loan vs Outright Purchase

 

Feature Novated Lease Car Loan Buy Outright
Tax savings ✅ Yes ❌ No ❌ No
GST savings ✅ Yes ❌ No ❌ No
Upfront cost ❌ None ✅ Deposit ✅ Full payment
Running costs bundled ✅ Yes ❌ No ❌ No
Ownership ❌ End of lease ✅ From day one ✅ From day one

 

Frequently Asked Questions

You can transfer the lease to your new employer or take over the payments privately.

Absolutely. Many EVs under the luxury car tax threshold qualify for FBT exemption, making them a tax-smart choice.

It’s a form of finance, so it can — but repayments are typically stable and predictable.

Yes, you can include the comprehensive insurance premium as of your running costs.

How to Get Started with Fingo

Getting started is easy with Fingo’s expert support:

  1. Use our Novated Lease Calculator to estimate your savings.
  2. Choose a new, used, or electric vehicle.
  3. We’ll talk to your employer and finalise the paperwork.

Hit the road in your new car — and start saving.

A novated lease can be a tax-effective and flexible way to drive the car you want, especially when paired with Australia’s EV incentives and FBT exemptions. Whether you’re commuting to work or road-tripping on the weekends, let Fingo help you make a smarter choice with your car finance.