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Novated Leasing: Tips for Budgeting and Managing Expenses

Novated leasing is increasingly popular with Australian employees and businesses.

It’s a tax-effective way to finance a new vehicle and manage ongoing expenses. In general, novated leasing means you pay less tax and end up with more of your paycheck in your pocket.

As novated leasing is a financial commitment, it’s important to understand what you’re signing up for and plan for the future.

For example, knowing what happens at the end of a novated lease will influence decisions you make at the starting line, like which car you choose and how you structure payments.

Budgeting effectively ensures you reap the rewards of novated leasing. It means maximising savings, simplifying monthly finances, and cruising through your lease to reach the finish line in the best position.

What you need to know before entering into a novated lease

Payment structure

Similar to other car financing options, novated leases are typically structured with fortnightly or monthly payments. However, there are a couple of key differences working in your favour:

  • Simplified budgeting: Novated leasing bundles all vehicle and running costs (including fuel, insurance, registration, repairs and even tyres) into a simple salary deductions. You’ll never be surprised by out-of-pocket servicing or repair costs.
  • Pre and post-tax payments: Unlike traditional financing, novated lease payments are deducted from your pre and post-tax salary. This reduces your taxable income and often means more in your pocket each month.

Lease duration

Novated leases typically range from one to five years. You have the freedom to choose a timeframe that aligns with your financial goals and driving needs.

If you plan to upgrade your car sooner rather than later, a shorter lease term might be ideal. Shorter lease terms might have higher monthly payments but lower overall interest costs.

Conversely, a longer lease can potentially reduce your monthly payments.

Use our novated lease calculator to see how your lease duration, income and usage affect payments.

Included services

Novated leases bundle vehicle costs with on-road services.

When you choose Fleetcare for your novated lease, that means your payments cover:

  • Lease payments
  • Fuel cards
  • Repairs and maintenance
  • Registration and compulsory third-party (CTP) insurance
  • Comprehensive insurance
  • 24-hour roadside assistance
  • New tyres
  • Vehicle protection options
  • Crash management

With a novated lease from Fleetcare, you can customise your inclusions to suit your driving habits.

Mileage and use

When calculating your lease payments, we factor in how far you plan to drive.

Significantly exceeding your estimated kilometres can result in additional charges at the end of a novated car lease, so we recommend you estimate with some leeway for long drives.

If your driving habits change during your lease term, get in touch with us to discuss your options.

DIY options

While many services can be included in a novated lease, you can choose your own insurance and maintenance providers. This flexibility allows you to tailor the lease to your specific needs or take advantage of loyalty discounts from your preferred suppliers.

If you source your own insurance, we’ll include the budgeting in your novated lease so you’re reimbursed.

Budgeting for benefits

Unlike traditional financing, novated leasing provides the flexibility to tailor an agreement that suits your driving habits. For example, if you drive less, earn more, or lease the car for longer, your lease payments could be lower.

You also have your choice of vehicle. If you prefer a cost-effective, compact model, electric vehicle, or even a used car, we’ll source it and pass on the fleet discount.

In addition, novated leasing offers significant tax benefits:

  • Vehicle and running costs come from your pre and post-tax salary, reducing your taxable income.
  • Pay no GST on the vehicle or associated costs, meaning a 10% saving right out of the gate*.

We’ll help you understand benefits, budgeting, and FBT so you’re in the best position at the end of your novated lease.

What happens at the end of a novated lease?

What happens at the end of a novated lease term? The answer depends entirely on your circumstances.

We’ll reach out before your lease concludes to discuss your options.

Our novated lease team will provide personalised quotes and pricing based on your specific needs, answer any questions and help you navigate your possibilities.

Understanding residual value

One quick pitstop before we dive into what happens at the end of a novated lease.

Residual value” is a term you’ll hear often in novated lease negotiations, especially towards the end of your lease term.

The residual value is the amount you’ll need to pay if you choose to buy the vehicle at the end of the lease – essentially, your vehicle’s resale value after depreciation.

The residual value is set at the beginning of the lease and listed on your quote. This is calculated by the Australian Tax Office, as a percentage of the vehicle’s original value, based on the lease term.

Planning for this expense is essential because it will affect your decision at the end of the novated lease term.

Your options at the end of a novated car lease

1. Trade in or trade up: You can trade in your existing vehicle (or sell it privately) and upgrade to a new lease. This is our most popular option, allowing you to enjoy all the benefits of a novated lease while upgrading to the latest model.

2. Refinance: If you’ve grown attached to your current car, you can refinance for another lease term. The residual value is rolled into a new lease term and combined with running costs. You can still upgrade your car at any point during refinancing. We’ll take care of disposing of your current vehicle.

3. Payout: You can finalise your lease by paying out the residual value. You’ll no longer have access to the benefits, tax savings and convenience of a novated lease, but the car will be entirely yours.

Simplify your novated lease with Fleetcare

At Fleetcare, we don’t just get you behind the wheel of your dream car. We ensure a smooth ride throughout your novated lease journey, and ensure you’re crystal clear on what happens at the end of a novated lease term so you can plan accordingly.

Our comprehensive services include sourcing (with fleet discounts), lease bundling, fuel card convenience, 24/7 driver support and the flexibility to tailor inclusions to your needs.

Find out more about novated leasing today. Call us on 134 333 or contact us online.

*GST may apply depending on vehicle value financed and does apply to the residual value.

Get in touch with our friendly team