For many Australians, car finance options can feel confusing. While novated leasing is widely known, many of us question how it works and whether it could be a good option for our household budgets.
This guide is here to break down the basics and bust some myths, and help you make a more informed decision about whether it could be right for your situation.
What is a novated lease?
A novated lease is an ATO-approved way to salary package a vehicle through your employer. In simple terms:
- You choose a car
- A finance provider sets up the lease
- Your employer makes regular payments using a mix of your pre- and post-tax salary
With many novated lease arrangements, eligible running costs — such as fuel, registration, insurance and servicing — can be bundled into one regular payment.
Because part of the payment may come from before-tax salary, some employees may be able to reduce their taxable income, which could lead to tax efficiencies depending on individual circumstances.
Providers like Oly typically manage the setup process with you and your employer, which may reduce the amount of admin compared with managing multiple car expenses separately.
Myth 1: You need to work in big business or government
While novated leasing has traditionally been popular in large organisations, many small and medium businesses can also participate.
In some cases, employees who are full-time, part-time or even self-employed may be able to access novated leasing if their employer agrees to the arrangement.
If you have a steady income and an employer willing to facilitate salary packaging, novated leasing could be worth exploring — even if you don’t work for a large corporation.
Myth 2: You need to be high earner
Potential benefits depend on your individual tax position, vehicle choice and usage.
Because payments are typically structured using a mix of pre- and post-tax salary, some employees across a range of income levels may find value in the arrangement.
For eligible electric vehicles, current fringe benefits tax (FBT) exemptions may allow a larger portion of the payment to come from before-tax salary, which could improve the overall value proposition for some drivers.
However, the level of benefit will vary, and it’s important to review personalised estimates before making decisions.
Myth 3: You’ll never own the car
When the lease term ends, you usually have several options, which may include:
- Paying the residual value to take full ownership
- Paying the residual and starting a new lease on another vehicle
- Refinancing the residual and continuing with the same car
This flexibility is one reason some drivers consider novated leasing alongside traditional car loans.
Why some drivers choose Oly
When exploring novated leasing providers, support and simplicity often matter just as much as potential savings.
Oly aims to help streamline the process by:
- Guiding customers through setup with their employer
- Helping arrange automatic salary deductions
- Providing tools to estimate potential tax outcomes
- Supporting customers from sign-up through the life of the lease
For people new to novated leasing, having step-by-step support may help reduce confusion and make the process feel more manageable.
Is Novated Leasing Right for You?
Novated leasing isn’t a one-size-fits-all solution, but it may be worth considering if you:
- Are employed and able to salary package
- Want to bundle eligible car costs into one payment
- Are comparing alternatives to a traditional car loan
- Are interested in potential tax efficiencies
Because outcomes vary, it’s generally recommended to review personalised calculations and consider independent financial advice before proceeding.
IMPORTANT NOTE: This is general information only and not financial, tax or legal advice. Eligibility criteria, employer participation and terms and conditions apply. Potential tax outcomes and savings will vary based on eligibility, individual circumstances and current legislation. Your actual savings are dependent on your personal circumstances. Seek independent legal, financial or other professional advice before making any decisions related to this information.
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