Novated Leases are a commercial facility available to PAYG Applicants who have an arrangement with their Employer to Salary sacrifice their car loan repayments.

The Lessee (Borrower/Employee) enters a Lease arrangement with the Lender (Lessor) and a Novation Deed is agreed to by 3 parties – the Employee, the Employer and the Lender.

The Lender will pay the Supplier the funds, and you will take possession of the car. The Lender will take security over the car you are purchasing, and when the loan is repaid you will own it.

  • Fixed Interest Rates

  • Tax Benefits associated to the salary sacrifice**

  • Residual Values in line with the ATO Guidelines

  • Loan Terms up to 5 years.

  • Pre-tax deduction of your loan repayment (it may be the full repayment or part of the repayment).

PAYG Applicants who have an arrangement with their Employer to salary sacrifice their car loan repayment. Repayments are generally deducted from your pre-tax salary.

A Maintained Novated Lease also includes the day-to-day running costs of the car, in the pre-tax deduction of your salary. Expenses such as servicing, tyre replacement, fuel, insurance are forecast for the term of the lease and included in to one monthly repayment.

If you leave your Employer then the Lease repayment remains your responsibility. The Lease Agreement is in your name, not the Employers.

Your new employer may agree to take over the existing Novation Agreement. If so, a new Novation Deed would have to be signed.

The ATO sets the residual value limits (as below)*.

Year 1 65.63%

Year 2 56.25%

Year 3 46.88%

Year 4 37.50%

Year 5 28.13%

*discuss any tax related issues with your tax advisor/accountant.

Check out some of our blogs before you buy and apply.


No, in most cases a Novated Lease is for PAYG Employees.

No, it is not. As an employee you must provide the Lender with income evidence to support your loan application, similar to any application for finance.

No, the maximum loan term is 5 years.

Do i have to have a residual value?

Yes, under the ATO requirements

Yes. these can be substantial if you repay the loan prior to the expiry. The quantity is unknown at inception of the loan, and varies between lenders. It can equate to the full interest charges initially agreed in the Lease contract.

Yes. It is your responsibility to repay the Residual Value at the end of the Lease term.

No, the Lender claims the GST component but the saving is generally passed on to you.

No, under a Lease arrangement a deposit is not permitted. The full purchase price must be financed.

You have three options available to you at the end of the loan term, when the residual value falls due:

  1. If you choose to retain the car, then you can pay the value of the Residual Value to the Lender as one final repayment.

  2. Trade In your vehicle and any value can be applied to the Residual Value. For example, if you have a final residual of $ 15,000.00 and you trade your vehicle in for $ 20,000.00; the Dealer will repay your residual value and you will have $ 5,000.00 equity towards your new car.

  3. Refinance the residual value if you would like to keep the car. You can consider refinancing over a 2-3 year period.

*discuss any tax related issues with your tax advisor/accountant.

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