Is a novated lease worth it? Benefits explained


You’ve probably heard of a novated lease, but how does it work? More importantly, what’s in it for you? Here we outline the benefits for both employers and employees.

What’s a novated lease?

It’s an agreement between an employer, employee and a lease provider, that allows the employee to lease a car from their pre-tax salary. A form of salary packaging, a novated lease is a tax-effective way for an employee to get into the car they want.

How can it benefit employers?

Being able to offer employees perks like novated leases can help you stand out from your competitors, at no cost to you. If you have staff, you can:

  • Offer competitive remuneration packages and be an employer of choice
  • Attract and retain quality employees
  • Enjoy tax-deductable payments
  • Reduce your payroll tax and WorkCover costs
  • Remove the liability/asset of cars from your books
  • Keep the car with employees so you’re not stuck with unwanted cars.

How can it benefit employees?

If you’re an employee, you can drive your dream car through a novated lease. It can help you:

  • Save on tax
  • Free up cash flow
  • Bundle running costs like petrol, servicing, insurance and rego
  • Get a great car, even if you drive low kilometres
  • Not worry about payments, as they’re deducted from your salary
  • Usually take the car with you, if you change jobs.

Man in suit sitting in the driver's seat of a car

How does it work?

  1. The employer selects a lease provider – usually a fleet company, car manufacturer or bank.
  2. The employee chooses the car they want.
  3. The lease provider calculates the monthly payments, including potential savings.
  4. The paperwork is completed.
  5. The employee drives their chosen car, while the employer deducts monthly payments from the employee’s salary to pay the lease provider.

See how much you could save

If you’re still on the fence about novated leasing, it’s worth checking out how much you can save. Most lease providers have novated lease calculators where you can work out the estimated cost. Orix Australia have a great one on their website and there are plenty of others available online.

To read more handy tips on small business, check out Employer Guide: Working from home support your employees and Six productivity tips for working as remote team.


The advice on this website is general in nature and has been prepared without taking into account your objectives, financial situation or needs. You must decide whether or not it is appropriate, in light of your own circumstances, to act on this advice. You should ensure you obtain and consider the policy wording or Product Disclosure Statement for the policy before you make any decision to buy it.

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