You might be wondering what the advantages are if you’re an employee thinking about a novated car lease with your employer. What are the benefits to you and why is it superior to more conventional kinds of car financing?

So, stop wondering now! We go down the advantages of novated leasing in 2023 in this blog. Instead of relying on rumours, read our overview of novated lease and make your own judgement. Looking for more information on novated leasing? See “Novated Leasing, How Does It Work?” in our blog.

Does Novated Lease Make Sense?

A novated lease is a contract that you, your car financier, and your employer enter into together. You have the option to buy, sell, or upgrade the vehicle at the end of the lease. Salary sacrifice, sometimes known as salary packaging, is a tax-efficient method of purchasing a car. With a novated lease, you are not restricted to any specific car type, or model, unless agreed by your employer. In most cases, you can select the car you want to lease, whether it is electric or petrol, or a new, second-hand or even your existing car.

How does Novated Lease Work in Australia?

A novated lease is an agreement between you, your employer and a financer. You choose the car you want and all the estimated costs to keep that car operating are packaged together into fixed and agreed payment that will be deducted from your salary. The payment obligation is novated or transferred to your employer who makes deductions through payroll and pays the financer directly.

Benefits of Novated Lease

The following are novated lease benefits:

  • Easy loan payments

The ideal ‘set and forget’ vehicle financing agreement is novated leasing. All of your car’s operating expenses, including insurance, gas, registration, servicing, and tyres, are covered by recurring deductions from your paycheck. Additionally, this makes creating budgets and daily financial planning much simpler.

  • Cost and post-tax savings

Now, the question arises, ‘How does a novated lease save you money?’. The pre-tax payments are by far the biggest benefit! You can save on income tax because the lease payments are deducted from your gross wage, which will put more money in your pocket. Additionally, the majority of the running costs and the price of the car are exempt from GST! In comparison to conventional car finance, one study shows that novated leases result in an average annual savings of $5,188.

  • Opportunity to upgrade

At the end of the lease for a new or different model, you can trade in your vehicle without selling your old car.

  • Budgeting car’s operating expenses

The ease of having all of your car’s operating expenses spread out over a year is among the most popular features of novated leasing. You can claim the following expenses of your pre-tax dollars:

  • registration
  • servicing
  • maintenance
  • insurance
  • fuel
  • tyres
  • carwashes
Should I Get a Novated Lease?

Whether you should take out a novated lease or not will depend on your circumstances. It is important to contract with your employer before entering into a novated lease, it is necessary to understand the contractual implications of it and calculate it to check if you can afford repayments coming out of your pre-tax salary. In addition to it, at the end of the lease, check out the payment of the residual amount. Your circumstances can better answer ‘Is novated lease worth it?’.

Can You Claim Depreciation on a Novated Lease?

Only the holder of the leased equipment is eligible to claim depreciation on the asset. Checking the holder can be complex and it depends on the leasing arrangement.


For a person without enough knowledge regarding the novated lease, it can be difficult to manage everything related to the novated lease. For this, you need to seek help from a reliable accounting firm. If you don’t know when is novated lease is worth it, then you need to consider your circumstances. If you are still confused about the novated lease, you can get help from our professionals at Reliable Melbourne Accountants.