If you’re considering a new car through salary packaging, you’ve probably asked yourself one key question: how does novated lease work?
And right behind that comes another question – how do I find the right provider?
Choosing a novated lease can unlock major savings. But only if you choose a novated lease company that knows what it’s doing. From pricing transparency to post-signing support, there are a few things that separate the great from the average.
In this guide, we’ll walk you through how novated lease works, and highlight the features that make a provider stand out.
How Does Novated Lease Work?
Let’s start with the basics. If you’re new to salary packaging, here’s a simple breakdown of how does novated lease work:
A novated lease is a three-way agreement between:
- You (the employee)
- Your employer
- A finance company
You lease a car, and your employer deducts the running costs directly from your salary – before tax.
That means your payments for the lease, fuel, rego, insurance, servicing, and tyres are bundled into one deduction. This can reduce your taxable income and simplify budgeting.
Still wondering how does novated leasing work in practice? Try this novated lease calculator to see the breakdown for yourself.
See also: Bookkeeping for Business Prosperity Ktuexhyi
Understanding the Novated Lease Process
The novated lease process is straightforward – when handled by the right team.
Here’s how it typically flows:
Step 1: Choose Your Vehicle
You can lease a new or approved used car. Choose what suits your lifestyle and budget.
Step 2: Get a Quote
A proper quote includes the vehicle cost, finance amount, running costs, Fringe Benefits Tax (FBT), and total deductions.
Step 3: Employer Approval
Your employer signs off on the salary packaging setup. The novated lease policy must be compatible with your workplace agreement.
Step 4: Sign the Vehicle Lease Agreement
You sign a vehicle lease agreement with the financier. The lease is then “novated” (transferred) to your employer for payment.
Step 5: Drive Away and Enjoy
You start driving while your employer manages the payments from your pay. At lease end, you can buy the car, refinance, or return it.
It’s that simple – when the company you work with knows how to guide you through it.
What Makes a Great Novated Lease Company?
Not all leasing companies are created equal. Some confuse you with hidden fees or limit your car choices. Others walk with you every step of the way.
Here’s what to look for when choosing a standout novated lease company.
1. Transparency on Costs
The best providers show you every cost up front. That includes:
- Lease repayments
- Admin fees
- FBT
- Running costs
- GST savings
They’ll also show how the lease affects your take-home pay.
Tools like the novated lease calculator help make this clear from the start. If a provider can’t break it down line-by-line, walk away.
2. Flexibility With Vehicle Options
A strong company doesn’t limit your car choice.
Whether it’s:
- New or used
- Petrol or electric
- Purchased outright or fleet-sourced
They’ll support your decision – not restrict it. That means tailoring your lease to your lifestyle, not the other way around.
3. Support With Employer Integration
One of the most overlooked steps in how novated lease works is employer setup.
A great provider helps your HR or payroll team get everything moving quickly. They’ll manage:
- Employer approval forms
- Salary packaging documents
- Ongoing account adjustments
If your company is new to novated leasing, the provider should make onboarding smooth.
4. Experience With EV and Used Car Leasing
More Australians are asking:
- Can I lease an electric vehicle?
- Can I lease a used car?
The answer is yes – with the right company.
A great provider will:
- Offer tailored EV lease packages
- Factor in FBT exemptions for eligible EVs
- Support used vehicles that meet age and condition rules
- Advise on long-term value and residuals
They’ll also show you how the numbers stack up using clear calculators and comparisons.
5. Simple Novated Lease Policy
Your employer’s novated lease policy defines what’s allowed – and what’s not.
But a great provider helps you interpret that policy. They’ll:
- Check if your employer allows novated leasing
- Explain how leave, job changes, or resignations affect your lease
- Offer transition options if you switch employers mid-lease
This type of support is priceless when life changes unexpectedly.
6. Competitive Rates and Fee Clarity
You want value – not fine print surprises.
The right provider offers:
- Competitive finance rates
- Transparent admin fees
- No pressure-selling of insurance or extras
- Clear residual (balloon) values
They’ll compare lease vs buy, and help you decide with real numbers – not sales talk.
7. End-of-Lease Options
Great providers don’t leave you hanging at lease end.
They’ll explain your options clearly:
- Pay the residual and own the car
- Refinance for another term
- Trade it in for a new lease
- Hand it back
They won’t pressure you to renew. They’ll guide you toward what fits your needs.
Final Thoughts
If you’ve been asking how does novated lease work, you now know the answer: It’s a smart, tax-effective way to drive your next car – provided you choose the right partner.
From the first quote to the end of your lease, a reliable novated lease company makes the journey easier, clearer, and more rewarding.
Use a novated lease calculator to explore your budget. Ask questions. Compare providers. And choose the one that ticks all the boxes.
Because when done right, a novated lease isn’t just a car deal – it’s a better way to drive.
