Understanding novated licensing

If you are trying to get a car, there are several ways you can get the necessary finance for your purchase, one of such is through novated leasing. You may start to wonder, what does novated leasing mean? It refers to a salary packaging arrangement that involves three people instead of the regular two-way agreement between the lender and the borrower. In a novated leasing, the finance company, the person seeking the finance, and their employer are involved. Through novated leasing, the person seeking finance does not just have access to car finance, but they can also include the running costs for the car, such as the cost of fuel, insurance, servicing, etc., into one package that you can make payments for. A novated lease is very beneficial as it allows you to get the car you want and cover all the costs associated; it is available for all kinds of cars, whether new, used, or an existing car.

Under the novated leasing, the third party, which is the employer of the person taking the car finance, will bear part or all the obligations in the agreement. Novated leasing is quite common in Australia and is used by employers to provide their employees with vehicles through salary packaging. With this salary packaging arrangement, the employer will be responsible for payment of the lease and other obligations in line with the agreement, while the employee will use the car in accordance with the terms of the agreement. In exchange for these payments, the employer will reduce the salary of the employee proportionate to the total cost of the loan. Such a reduction in salary will generally mean less income tax which is expected to benefit the employee financially.

For a novation deed to be valid, the person must remain employed to the employer and should the person cease to be employed, the agreement is immediately cancelled, and the obligations that the employer has agreed to bear under the agreement becomes that of the employer again. In this case, a new agreement can be entered into in which a new employer takes up the obligation. The obligations end with the end of the lease.

While the obligations in the agreement are transferred to the employer, you, as the person as the employee and the person benefiting from the finance deal, still have the ultimate responsibility. Thus, if the employer fails to make any payment on the lease, you are expected to make the payments. The same goes for when you take an unpaid vacation.

Types of vehicle you can lease

When using a novated lease, there are usually restrictions on the kind of car you can use it for. It is usually available for cars that are below the threshold for luxury car tax in value. This amount generally changes each year as the Australian Tax Office reviews it. The value of the car includes the value of accessories, attachments, or parts imported at the same time or supplied with the car. Once the car is not above this threshold, you can easily get it.

What is included in the Novated Lease?

Your novated lease will generally include the following;


The car you are buying itself is fundamental to the novated lease, and it is important that you select a car that matches your needs. You have multiple options when it comes to cars as you can pick either new or used cars.


The novated lease can also cover the cost of fuel when using the car. Usually, the finance company will issue you a fuel card that you can use anywhere to get fuel, and the payments for the fuel will generally be included in your finance deal.

Repairs and Maintenance

Car servicing costs will generally be included in the agreement. This means that all the servicing on the vehicle for the time you are using it will be charged to the lender’s account, and the employer will bear the obligation.

Tyres, Windscreen, Batteries and other Accessories

Generally, your novated lease agreement will also include the cost of replacement parts for your vehicle accessories. Commonly included costs are batteries, tyres, and windscreen.


The initial car registrations and renewals are also included in the payment, which means you don’t have to pay for anything whatsoever. The cost will be paid through the agreement, and you don’t have to start looking for money to cover these costs each time they expire.

Comprehensive insurance

Your car insurance is essential, and the novated leasing agreement also covers it. With this, you don’t need to go looking for insurance again because the finance company will offer you the ideal insurance policy for your car.

Roadside Assistance

Another thing you will get with novated leasing agreement is complimentary roadside assistance. While it is not all finance companies that provide this benefit, most will do so in a situation where the duration of the lease surpasses that of the car manufacturer’s Roadside Assistance.

Novated is beneficial to anyone who wishes to drive a car. Whether you are covering thousands of kilometres or just tens, you can always get a novated lease. It is also available to anyone regardless of the wage gap. It is not exclusively for high salary earners and works best for those with lower income tax rates. You can also use it for both used cars and new ones. Many novated leases also contain the clause that allows you to buy the vehicle at residual value after the lease has expired. Thus, as long as you are in salaried employment, you should consider using novation agreement leases for your car acquisition.

We can help you with the whole process, from connecting you with the right lender and any negotiation necessary to secure the finance you need.