What is a Novated Lease?

Thinking about buying an EV but don’t want to pay for it outright? There are several finance options available, such as personal loans, but a novated lease is often a smarter choice for many reasons. So, what exactly is a novated lease?

A novated lease is a type of salary packaging arrangement between you, your employer, and a leasing company. This type of lease allows you to finance a car—whether it’s new, used, or even a car you already own—by using part of your pre-tax salary. A novated lease for an electric vehicle (EV) comes with plenty of advantages, including potential tax savings and simplified payments.

Let’s take a closer look at how it works and how you can benefit from a novated lease through Novated Saver.

How Does a Novated Lease Work?

Novated leasing with Novated Saver is designed to make the process straightforward and stress-free. We handle all the tricky details, and your employer manages the financial side by deducting payments from your pre-tax salary.

1. Setting Up Your Lease

The first step is to choose the car you want—whether that’s a sleek electric vehicle, a dependable family SUV, or something in between. Once you’ve selected your car, an agreement is established between you, your employer, and Novated Saver. The car will be leased under your name, while your employer takes care of the lease payments, meaning you won’t need to worry about handling multiple bills.

2. Making Payments

One of the best parts of a novated lease with Novated Saver is how easy it is to manage payments. Lease payments are automatically deducted from your salary before tax, which reduces your taxable income and gives you immediate savings. You won’t have to worry about making payments or covering car running costs out of your post-tax income—everything is rolled into one convenient, pre-tax payment.

3. The Lease Duration

You get to decide the length of your lease. Most novated leases run for three to five years, but we’ll work with you to create an agreement that suits your financial goals and situation. By tailoring the lease term, you can better manage your monthly payments and even plan for the future—whether that’s purchasing the vehicle at the end of the lease or leasing a new one.

Example of a Novated Lease Agreement

Let’s look at how a novated lease might work in real life.

Claire works at Avenue Solutions and wants to lease a new Tesla Model 3. She decides to go with a four-year novated lease through Novated Saver, with her employer managing the payments. Her monthly payments are $1,000, which also covers her EV’s charging costs.

These payments are deducted from Claire’s annual pre-tax salary of $90,000. By leasing her car through Novated Saver, her taxable income is reduced to $78,000, saving her money on her tax bill. Claire loves how easy it is to budget with everything bundled into one monthly payment, and she’s also thrilled about driving a more sustainable vehicle.

Things to Consider with a Novated Lease

While there are plenty of benefits to a novated lease, there are a few factors to keep in mind. For example, if you change employers while your lease is still running, you may need to renegotiate the lease with your new employer or discuss other options with Novated Saver. We’re here to help you with any transitions, ensuring the process remains as smooth as possible.

EV Novated Leasing with Novated Saver

At Novated Saver, we specialize in offering flexible and affordable novated leases for electric vehicles. With potential tax savings, bundled expenses, and stress-free payments, novated leasing is a great way to get into the car you want without the hassle of traditional financing. We make the process simple and straightforward, so you can enjoy the benefits of driving an EV while saving money on taxes.

FAQs About Novated Leasing

Do I own the car at the end of a novated lease?

At the end of the lease, you have a few options. You won’t automatically own the vehicle, but you may choose to purchase it for its residual value, extend the lease, or return the car and lease a different vehicle.

Can I sell a car under a novated lease?

No, you cannot sell a car that’s still under a novated lease, as the vehicle is technically owned by the leasing company until the end of the lease. Once the lease is complete and you choose to buy the car, it will then be yours to sell if you wish.

Do you pay for fuel with a novated lease?

You can choose to include fuel costs in your novated lease agreement, meaning your pre-tax salary deductions would cover fuel as well. If fuel isn’t included, you would need to pay for it out of pocket as you would with a traditional car ownership arrangement.

Is an EV novated lease good for tax?

Yes, there are significant tax benefits to leasing an EV through a novated lease. Since the payments are taken from your pre-tax income, your taxable salary is reduced, resulting in lower tax payments. Additionally, if you lease an electric vehicle, you may be eligible to avoid fringe benefits tax, making it an even more attractive option.

What is a balloon payment?

A balloon payment is a lump sum that may be due at the end of a lease agreement. You can opt to make a larger payment at the end of the lease, which helps reduce your monthly payments during the term of the lease.

What is the residual value on a novated lease?

The residual value is the estimated worth of the vehicle at the end of the lease term. If you choose to purchase the car at the end of your novated lease, you’ll pay the residual value to own the vehicle outright.

At Novated Saver, we’re dedicated to helping you get the most out of novated leasing, whether you’re looking to drive an EV or another type of vehicle. Contact us today to learn more about our novated lease options and start saving on your next car.