If your novated lease is coming to an end, you’re probably wondering: What happens next?
The good news is you have options.
The key is understanding how each one works so you can choose what fits your situation best.
The 3 Main Options at the End of a Novated Lease
At the end of your lease term, you will typically have three choices:
- Pay the residual and own the car
- Refinance or extend the lease
- Upgrade to a new vehicle
Each option comes with different financial outcomes and flexibility.
Option 1: Pay the Residual and Own the Car
At the end of your lease, there is a residual value (also known as a balloon payment).
This is a pre-set amount that represents the car’s value at the end of the lease.
What happens if you choose this option:
- you pay the GST inclusive residual amount
- the car becomes fully yours
- the lease ends completely
When this makes sense:
- you want to keep the car long-term
- the vehicle still suits your needs
- you prefer no ongoing repayments
Option 2: Refinance or Extend the Lease
Instead of paying the residual upfront, you may choose to refinance or extend your lease.
What this means:
- the residual is rolled into a new agreement
- you continue making payments
- you keep driving the same vehicle
When this makes sense:
- you want to keep the car but avoid a large upfront payment
- the car still fits your lifestyle
- you prefer to spread costs over time
Option 3: Upgrade to a New Vehicle
Many drivers choose to upgrade at the end of their lease.
What this involves:
- Finalising (trade in or selling privately) your current lease by paying off the GST inclusive residual amount
- starting a new lease with a different vehicle
- updating your package to match your current needs
When this makes sense:
- you want a newer car with updated features
- your needs have changed
- you want to compare newer models or EV options
Before upgrading, it’s worth running your numbers to compare different vehicles.
Comparing Your End-of-Lease Options
| Option | Ownership | Upfront Cost | Flexibility | Best For |
|---|---|---|---|---|
| Pay Residual | Yes | Higher | Low | Long-term ownership |
| Refinance | No (yet) | Lower | Medium | Keeping current car |
| Upgrade | No | Varies | High | New vehicle choice |
What Is a Residual Value?
The residual value is set at the beginning of your lease based on ATO guidelines.
It represents the expected value of the car at the end of the lease term.
This amount is important because it determines:
- your final payment (GST inclusive) if you want to own the car
- your refinancing options
- your upgrade flexibility
What Should You Consider Before Choosing?
Before deciding, think about:
- how much the car is worth today
- your current financial situation
- whether the car still suits your needs
- your future plans
You can also use a novated lease calculator to model different scenarios.
Common Mistake to Avoid
The biggest mistake is:
waiting until the last minute
Planning ahead gives you more flexibility and better options.
Not adding GST to the residual amount when paying it out.
What Happens Next?
As your lease approaches its end:
- your provider will contact you
- you’ll be given your options
- you can choose what works best for you
As a specialist in Australian novated leasing, Fingo helps drivers understand their options so they can make informed decisions based on their situation.
Frequently Asked Questions
What is a residual value?
It is the final amount required to own the car at the end of the lease and it attracts GST.
Can I extend my novated lease?
Yes. In many cases, you can refinance or extend your agreement.
Is upgrading to a new car common?
Yes. Many drivers choose to upgrade at the end of their lease.
When should I decide what to do?
It is best to start reviewing your options a few months before your lease ends.
How do I know which option is best?
The best approach is to compare your options based on your financial situation and vehicle needs.
