Knowledge Centre

The pros and cons of using a novated lease to finance a new car

30/05/2025

A novated lease is a three-way agreement between you, your employer and a finance company for the acquisition of a vehicle.

You lease rather than buy the vehicle, with your employer making the lease payments on your behalf from your salary. These payments come from your pre-tax income, which can reduce your taxable income and overall tax bill.

• Pros include potential tax savings, simplified budgeting (as running costs like fuel and servicing can be bundled) and access to a new or near-new car.
• Cons include the risk of being liable for payments if you change jobs, possible early termination fees and not owning the car at the end unless you pay a residual value.

A novated lease can be a smart option for employees who want convenience and potential tax benefits – but it’s not the right fit for everyone. Before committing, it’s important to compare the total cost of leasing versus buying, and to understand how job changes might affect your agreement.

Contact me if you’d like help weighing up whether a novated lease is right for you.