How it works

How Does a Novated Lease Work?

A novated lease is an agreement that allows you to pay for your car and its running costs directly from your salary, before tax. Instead of making separate payments for things like registration, servicing and insurance, everything is bundled into one regular payment through your employer. Below is a closer look at how it all works, from start to finish.

The Novated Lease Agreement

A novated lease involves three parties: you (the employee), your employer and a finance provider. Once you’ve chosen your vehicle, the finance provider purchases the car, and your employer takes on the responsibility of making the lease payments on your behalf. These payments are deducted from your salary, using a combination of pre-tax and post-tax dollars, which can reduce the amount of tax you pay.

The agreement is designed to take care of more than just the car itself. A typical novated lease covers the cost of repayments, insurance, servicing, registration, fuel and tyres. By packaging these expenses together, you avoid the usual surprises and upfront costs that come with car ownership.

Instead of dealing with big bills throughout the year, the car running costs are managed in one predictable payment, making it easier to keep on top of your budget.

During the Novated Lease

Once your novated lease is in place, your employer makes the car payments directly from your salary, covering both the finance repayments and all of the running costs of the vehicle. This means that expenses like fuel, servicing, registration, insurance, and tyres are included in one simple payment, eliminating the need to budget for unexpected bills.

A fully maintained novated lease ensures everything is accounted for, so you’re not left scrambling for funds when your car needs servicing or repairs.

Novated leasing works by splitting all the running costs between your pre-tax and post-tax salary, which helps reduce the amount of tax income you’re assessed on. Because part of your lease payment is deducted before you pay tax, many drivers see noticeable income tax savings throughout the lease term.

The structure of a novated lease provides tax benefits, making it a more cost-effective way to run a car compared to traditional car finance options.

There are different types of novated leases, with the most common being a fully maintained lease that includes both the car and its ongoing expenses.

During the lease, everything remains predictable—your payments are set, your vehicle expenses are covered, and your budget stays under control. Easi manages the details, so all you need to do is enjoy driving your car without the usual financial hassle of car ownership.

Coming to the End of a Novated Lease

As you approach the final months of your agreement, you may be wondering what happens at the end of a novated lease. One option is to keep the vehicle by choosing to pay the residual value, which is the agreed purchase price set at the start of the lease. Once this amount is paid, the car is yours, with no further lease payments required.

Alternatively, you might decide to trade the car in and start fresh with a new novated lease arrangement or refinance the remaining balance to extend your existing agreement. Whatever you choose, Easi is here to guide you through the process at the end of the lease while handling the details, so you're clear on your options and costs.

By this stage, you've likely become used to the convenience of having your car expenses bundled into one regular salary package-payment, and we can help you set up your next lease to keep things running just as smoothly.