How Do You Benefit from a Novated Lease?

novated lease benefitsWhen it comes to buying a new car, no other arrangement or deal out there is more interesting than a novated lease. For those who have a stable job and wants to drive a new car, the usual and most preferred option would be to get a conventional car loan through a financing institution. It works by paying a down payment and the corresponding monthly dues. However, some people do not like the burden of looking for money to pay for whatever is due for the month, which is why getting a vehicle that way is for them an absurd proposition. The good news is there is an alternative, which in most regards, is the better option to a conventional loan. This alternative comes in the form of a novated lease.


A novated lease, also known as “salary sacrifice” is a unique arrangement for paying for a car using your salary. It works by way of you paying for the vehicle you want as well as its running costs out of the combination of pre-tax and post-tax salary. So, instead of you figuring out where to get the money to pay for the car, your employer will make the deduction out of each payment you receive and sends it to the financier or leasing company. It is evident that one of the most coveted novated lease benefits is the fact that you will pay for the car you’re driving via your employer.



While you still will pay for the car, the best thing about the arrangement is that you are getting a tax break. The novation agreement provides that the employer makes the payments for the car and its running costs directly from your payroll. Since the deduction happens pre-tax, it means it significantly reduces your taxable income, and there is no cost whatsoever to the employer.


It is true that buying and owning a car in Australia corresponds to a significant investment. You will spend your hard-earned money on the monthly payments and running costs. However, you cannot deny the fact that a vehicle is an essential part of life and it provides a world of difference when you must go travel to work every day. But when you do not foresee a pay raise soon, you eventually will acknowledge the value of novated lease benefits. It is the perfect solution even if wages today are low. Aside from the fact that you do not worry about where to get money for the monthly payments, it also does not require a deposit, plus there are numerous prospective discounts you get on the purchase price. Overall, every employee out there who wants to drive and own his or her car in the immediate future must seriously consider getting one via a novated lease.