Buying a car is one of the biggest financial commitments many Australians make, but how you finance that vehicle can significantly impact your long-term costs.
For eligible employees, a novated lease offers more than just a way to pay for a car. It can help simplify budgeting, package everyday vehicle expenses into one regular payment and, depending on your circumstances, provide valuable tax advantages.
With electric vehicles becoming more affordable through salary packaging and more employers offering novated leasing as part of their benefits package, it’s no surprise that interest in novated leases continues to grow.
If you’ve been wondering whether a novated lease is right for you, here are seven benefits every Australian employee should know before making their next vehicle purchase.
1. You Could Reduce Your Taxable Income
One of the biggest reasons Australians choose a novated lease is the potential tax benefit.
Because lease repayments are generally made through salary packaging, part of your vehicle costs may be deducted from your pre-tax income, depending on your individual circumstances and the structure of your lease.
Reducing your taxable income can lower the amount of income tax you pay, making a novated lease more cost-effective than some traditional finance options.
The exact savings vary depending on factors such as:
- Your salary
- Your tax bracket
- The vehicle you choose
- Lease term
- Running costs
That’s why it’s important to compare your own numbers rather than relying on general estimates.
If you’re curious about your potential savings, you can estimate your repayments and tax benefits using Fingo’s Novated Lease Calculator.
2. Many Everyday Running Costs Can Be Included
Owning a car involves far more than just making finance repayments.
A novated lease can often package many ongoing vehicle expenses into one regular payment, helping make budgeting easier throughout the year.
Depending on your agreement, eligible expenses may include:
- Fuel or EV charging
- Registration
- Comprehensive insurance
- Scheduled servicing
- Maintenance
- Tyres
- Roadside assistance
Instead of paying these costs separately as they arise, they’re budgeted into your lease.
If you’re unsure what’s covered, Fingo explains what’s included in a novated lease package in more detail.
3. One Convenient Payment Makes Budgeting Easier
Many people underestimate how much easier vehicle ownership becomes when expenses are consolidated.
Rather than juggling fuel costs one week, registration the next and an unexpected servicing bill a few months later, a novated lease combines many eligible expenses into one predictable payroll deduction.
This makes it easier to:
- Plan your monthly budget
- Reduce unexpected vehicle expenses
- Manage cash flow
- Keep track of ownership costs
For busy professionals, this convenience is often just as valuable as the potential tax savings.
4. Electric Vehicles Can Be Even More Affordable
The growing popularity of electric vehicles has made novated leasing even more attractive.
Eligible battery electric vehicles may qualify for additional tax concessions under current Australian Government legislation, potentially reducing the overall cost of ownership.
Combined with lower fuel and servicing costs, many employees are finding that switching to an EV through salary packaging is more affordable than they expected.
If you’re considering making the switch, explore Fingo’s Electric Vehicle Novated Lease options to see which vehicles may be eligible.
5. You Can Choose New or Eligible Used Vehicles
Many people assume novated leases are only available for brand-new cars, but that’s not always the case.
Depending on the finance provider and your employer’s policy, you may also be able to lease an eligible used vehicle. This gives employees more flexibility to choose a car that suits both their budget and lifestyle.
Whether you’re looking for a fuel-efficient hatchback, a family SUV, a dual-cab ute or an electric vehicle, a novated lease can often be tailored to your needs.
Before deciding, it’s worth comparing the total cost of ownership rather than focusing solely on the purchase price.
6. You Can Usually Keep Your Vehicle If You Change Jobs
A common misconception is that you’ll lose your car if you leave your employer.
In reality, your vehicle remains yours to use. If you change jobs, several options may be available depending on your circumstances.
For example:
- Your new employer may agree to take over the novated lease by signing a new Deed of Novation.
- You may continue making repayments directly until another arrangement is made.
- You may refinance or restructure the lease if required.
Every situation is different, so it’s worth understanding your options before signing your agreement.
If you’re planning a career move, Fingo explains what happens to your novated lease when you change jobs in more detail.
7. You Have Flexible Options at the End of the Lease
A novated lease doesn’t necessarily mean you’re locked into one outcome.
At the end of your lease term, you’ll typically have several options available, including:
- Paying the residual value and keeping the vehicle
- Refinancing the remaining balance
- Trading the vehicle for a newer model
- Selling the vehicle (subject to your finance agreement)
This flexibility allows you to choose the option that best suits your financial circumstances at the time.
If you’d like to understand the process, Fingo’s guide explains what happens at the end of a novated lease.
Novated Lease vs Traditional Car Loan
| Feature | Novated Lease | Traditional Car Loan |
|---|---|---|
| Salary packaging available | Yes | No |
| Potential tax benefits | May apply | Generally no salary packaging benefits |
| Running costs can be bundled | Yes | Usually managed separately |
| Monthly budgeting | One regular payment | Multiple separate expenses |
| Vehicle ownership options at lease end | Multiple options | You own the vehicle after the loan is repaid |
| Available to eligible employees | Yes | Available to most borrowers |
Choosing between the two depends on your employment, income, vehicle choice and financial goals. If you’re weighing up both options, it’s worth comparing a novated lease with a traditional car loan before making a decision.
Why More Australians Are Exploring Novated Leasing
Several trends are driving renewed interest in novated leasing:
- Rising vehicle ownership costs, including fuel, insurance and servicing.
- Growing adoption of electric vehicles and hybrids.
- Increased awareness of salary packaging benefits.
- Employees looking for simpler ways to manage vehicle expenses.
- EV FBT Exemption
Rather than focusing solely on the purchase price, many Australians are now comparing the total cost of ownership, including finance, maintenance and ongoing running costs.
Final Verdict
A novated lease isn’t the right solution for everyone, but for many eligible Australian employees it can offer a smarter and more convenient way to finance a vehicle.
Potential tax savings, simplified budgeting and the ability to package many everyday running costs into one regular payment are just some of the reasons more Australians are considering salary packaging when buying their next car, in particular if you are considering an electric vehicle.
The key is to compare your options carefully. Your salary, vehicle choice, lease term and personal circumstances all play an important role in determining whether a novated lease is the best fit for you.
Before making a decision, estimate your repayments using Fingo’s Novated Lease Calculator or learn more about how a novated lease works to see how it could fit into your financial plans.
Frequently Asked Questions
Can I lease a used car?
Yes. Many finance providers offer novated leases for eligible used vehicles, giving employees more flexibility when choosing their next car.
Are running costs included in a novated lease?
Depending on your agreement, eligible expenses may include fuel or EV charging, registration, insurance, servicing, maintenance, tyres and roadside assistance. Learn more about what's included in a novated lease package.
What happens if I change employers?
Your new employer may be able to take over the lease, or alternative arrangements may be available depending on your circumstances. Read Fingo's guide on changing jobs with a novated lease for more information.
Is a novated lease better than a car loan?
It depends on your salary, employment, tax position and vehicle choice. Comparing the total cost of both options is usually the best way to determine which suits your circumstances.
Can I lease an electric vehicle?
Yes. Many electric vehicles can be financed through a novated lease, and eligible battery electric vehicles may also qualify for additional tax concessions under current EV FBT Exemption.
What is a residual value?
A residual value is the amount remaining on your lease at the end of the agreed term. You may choose to pay it, refinance it, trade the vehicle or sell it, depending on your agreement.
How can I estimate my savings?
The easiest way is to use Fingo's Novated Lease Calculator. It provides an estimate based on your salary, lease term and vehicle choice, helping you compare your options before applying.
