A novated lease just might be one of the best-kept vehicle financing secrets in Australia, one of the most unique ways to finance a vehicle that benefits everyone involved. 

Novated leasing is a type of car lease that is included in your salary agreement with an employer, and it allows you to purchase (and usually pay for the running costs of) a vehicle by making deductions from your pre-tax salary. In other words, instead of paying tax on the money you earn, you can use some of that instead to pay for a vehicle! Amazing!

 How this car financing secret works

A novated lease is a form of vehicle finance and a three-way agreement between an employer, employee, and financier. The employer offers the novated lease as part of a salary package, the employee provides the finance to pay for the lease, and a leasing company provides the vehicle and estimates the running costs. 

Even on a modest income (a $30,000 vehicle is possible on a salary of $45,000 per year) an employee can use a novated lease to not only acquire a vehicle at ex-GST pricing but salary package the car and all the costs involved. This includes fuel, insurance, servicing and repairs, registration and any other add-ons in your lease.

Learn more about the pros and cons of novated leasing.

The best bit? it can be used entirely for personal use. 

This is incredibly unique, as most forms of vehicle finance, especially in business, will require the vehicle to be used for business reasons the majority of the time. Instead, a novated lease simply offers the benefits of a great car lease while also reducing your salary. Basically, it’s one of the best and most cost-effective ways to obtain a vehicle in Australia today. 

As for the types of car you can choose, you wouldn’t be surprised if the options were a little limited with so many benefits on offer. However, once again, the novated lease proves itself as a leader in vehicle finance options. You can choose any car you like, provided that it’s a passenger vehicle, and the car’s maximum payload can’t be more than 1,000 kilograms.

For the modern family looking to upgrade or change their family vehicle, it’s even possible to novate more than just one car. Provided your employer’s salary agreement allows for it, and your salary is adequate to fully cover the associated costs of leasing two vehicles, you could choose multiple vehicles to suit your lifestyle, such as an SUV or family-friendly vehicle for the family and a professional vehicle for yourself. 

The only other major consideration (or limitation) when choosing a novated lease, is the age of the vehicle. You can use a novated lease to finance new cars or good-quality used cars provided the vehicle is not older than 15 years at the end of your lease term.

Generally, newer vehicles are easier to lease, as they’ll have fewer problems, be cheaper to service, and can be traded in and re-used a number of times before they’re sold off from the leasing company.

So, if you’re looking for a new vehicle in 2022 and want to also reduce your taxable income, it might be worth checking out the benefits of a novated lease with your employer!