Article Highlights
A novated lease lets you pay for your car using pre-tax salary, lowering your taxable income and bundling all running costs into one simple payment
You'll need basic documents like ID, recent payslips, and proof of address, with most approvals happening within 1-2 business days
At lease end, you can pay the residual and keep the car, trade up to a new model, or refinance
More Australians are choosing to lease rather than buy outright, especially with rising vehicle prices and interest rates. But what does car leasing and novated leasing actually involve, and is it the right move for you?
Let's break down everything you need to know before you sign on the dotted line.
What Is a Car Lease, and How Is a Novated Lease Different?
A standard car lease is pretty straightforward. You make fixed monthly payments over a set period (usually three to five years) to use a vehicle. At the end of the lease term, you either return the car, pay the residual value to own it, or trade it in for something newer.
Simple enough, right?
Now, a novated lease takes things a step further. It's specifically designed for employees and involves a three-way agreement between you, your employer, and a finance company. Your employer deducts the lease payments directly from your pre-tax salary, which lowers your taxable income.
However, you're not just financing the car. A novated lease bundles everything into one payment. Registration, insurance, servicing, tyres, even roadside assist. No more juggling multiple bills or surprise repair costs.
And because you're paying with pre-tax income, you save on tax while driving a newer, better car than you might afford with a traditional car loan.
First-Timer Checklist: The Paperwork You'll Need
Getting your first lease car sorted is easier than you think. Most finance companies ask for the same basic documents, and once you've gathered them, approval can happen in as little as 1-2 business days.
Here's what you'll typically need:
Proof of identity
Your Australian driver's licence (front and back) or passport.
Proof of income
Your last two or three payslips, or a copy of your employment contract. Some lenders might also request your most recent PAYG payment summary.
Proof of residence
A recent utility bill or bank statement dated within the last 90 days.
Credit check consent
You'll sign a form allowing the finance company to check your credit history.
Vehicle details
If you've already picked your dream car, bring the specs. If you're still deciding, no worries. Easi can help you find the right vehicle within your budget.
Employer sign-off
Your HR team will need to confirm that salary packaging is allowed under your employment agreement. Easi provides the form, so you don't have to chase it yourself.
Over the past three decades, Easi's team has guided thousands of Australians through their first lease. We've streamlined the paperwork to the essentials, and we liaise directly with your payroll department so you don't have to.
Step-by-Step: How the Novated Lease Process Works With Easi
Once you've got your documents ready, here's how our novated lease application process unfolds:
1. Initial chat and quote
You choose your new car, or we help you source one that fits your lifestyle and budget. Want an electric vehicle? We'll talk you through the tax benefits.
2. Savings illustration
We crunch the numbers to show you exactly how much you'll save on tax. This includes your pre-tax and post-tax salary split, GST savings, and any applicable fringe benefits tax (FBT) exemptions. If you're leasing an eligible EV, the FBT exemption can boost your savings even further.
3. Credit application
You submit your documents, and the funder reviews your application. Most approvals come back within a day or two.
4. Lease agreement signed
The three-way novation agreement gets signed by you, your employer, and the finance company. This formalises the arrangement and protects everyone involved.
5. Vehicle delivery
Your car is ordered and delivered. Easi bundles all your running costs, including rego, insurance, servicing, tyres, and roadside assist, into one fixed payment.
6. Payroll deductions start
Your employer begins deducting the agreed amount from your pre-tax salary each pay cycle. One predictable payment. No bill shock.
7. Lease end options
When your lease term finishes, you've got choices. Pay the residual value and keep the car, trade up to a newer model, or refinance. We'll walk you through the options so you can decide what works best.
Car Loan vs First Novated Lease: Crunching the Numbers on Tax Savings
So, how does a novated lease stack up against a traditional car loan?
With a car loan, you borrow money to buy the vehicle outright. You make repayments from your after-tax salary, and you're responsible for arranging and paying for insurance, rego, servicing, and repairs separately.
With a novated lease, you're paying for the car and all its running expenses from your pre-tax salary. That reduces your taxable income, which means you pay less tax overall.
Let's look at a quick example. Say you earn $90,000 a year and you're leasing a Mazda CX-30. By salary packaging the lease, you could save a few thousand in GST alone over the lease period, plus additional income tax savings depending on your marginal tax rate.
If you're considering an electric vehicle, the savings get even better. Zero-emission vehicles below the Luxury Car Tax threshold ($91,387 for 2025-26) are FBT-exempt when first held and used after 1 July 2022, according to the Australian Tax Office. That means you can package the entire cost without triggering fringe benefits tax.
Ready to Save on Your Next Car?
Leasing your first car doesn't have to be complicated. With the right support, it's a smart, tax-effective way to get behind the wheel of a newer vehicle without the financial stress of a traditional purchase.
At Easi, we've been helping Australians save on vehicle costs since 1992. Our team handles the paperwork, talks to your payroll, and makes sure you understand every step of the process. Whether you're after a family SUV, a fuel-efficient sedan, or the latest electric model, we'll find a solution that fits your budget and lifestyle.
Want to see how much you could save? Try our novated lease calculator or give us a call on 1300 266 828. We're here to answer any questions and get you sorted, fast.
Frequently Asked Questions
Is there a mileage limit on a novated lease?
Most novated leases include an annual kilometre allowance based on your estimated driving habits. If you think you'll drive more than average, just let us know upfront. We'll adjust your budget to cover the extra distance so there are no surprises at the end of the lease.
What happens to my lease if I change jobs?
Your novated lease can usually transfer to your new employer, as long as they offer salary packaging. If your new employer doesn't participate, the lease converts to a standard finance arrangement and you continue making payments from your after-tax salary. Easi will help you manage the transition.
Can I pay out my lease early?
Yes, you can settle your lease before the term ends. You'll need to pay the remaining balance plus any early termination fees outlined in your lease contract. We'll provide a payout figure so you know exactly what's involved.
What is the residual value, and do I have to pay it?
The residual value is the amount owing at the end of your lease term. It's set by the Australian Tax Office based on the length of your lease. For example, a three-year lease has a residual of around 37.5 per cent of the original purchase price. You can pay the residual and keep the car, refinance it, or trade the car in and start a new lease.
Are plug-in hybrids still FBT-exempt?
No. From 1 April 2025, plug-in hybrid electric vehicles (PHEVs) no longer qualify for the FBT exemption. Only zero-emission vehicles below the Luxury Car Tax threshold are eligible. If you're weighing up a PHEV, we can still help you save through standard salary packaging, but the tax benefits won't be as generous as a full EV.
Also, the FBT exemption will begin its transition to finishing starting in 2027.
