Pay for your car with pre-tax dollars and save thousands. PAYG employees save 30-45% on purchase, fuel, insurance & maintenance. GST-free purchase saves 10% instantly.
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A novated lease is Australia's most tax-effective way for PAYG employees to finance a vehicle. It's a three-way agreement between you (the employee), your employer, and a lease company. Your employer deducts lease payments from your pre-tax salary, dramatically reducing the effective cost of your vehicle.
Here's the key: instead of buying a $40,000 car with after-tax money (requiring you to earn $60,000+ gross to afford it), you pay for the car with pre-tax dollars via salary sacrifice. This means you pay significantly less tax, and you also save the 10% GST on the purchase price (on most vehicles). Combined, these savings typically reduce your vehicle costs by 30-45%.
Novated leases aren't just for new cars. You can salary package brand new vehicles, quality used cars, or even refinance your existing vehicle into a novated lease to start benefiting immediately. Over 200,000 Australians currently salary package their vehicles, and the number grows annually as employees and employers recognize the substantial financial benefits.
The "novated" part means your employment contract is "novated" (legally transferred) to include the lease obligation. But importantly, this creates zero liability for your employer — if you leave, the lease goes with you or reverts to you personally. Employers love novated leases because they cost nothing, require minimal admin, and provide a valuable employee benefit at zero cost to the business.
A fully maintained novated lease bundles everything: the vehicle purchase, all fuel, comprehensive insurance, registration, servicing, tyres, roadside assistance — into one simple pre-tax payment deducted from your salary. No more juggling bills. You get a fleet fuel card, all servicing is organized by the lease provider, and insurance renewals happen automatically. It's vehicle ownership on autopilot.
The smartest way for PAYG employees to finance a vehicle in Australia.
Pay for your vehicle using pre-tax dollars, reducing your taxable income. Save on income tax, GST, and bundled running costs.
Save 10% GST on the vehicle purchase price immediately. On a $40,000 car, that's $3,636 saved upfront before any other tax benefits.
Bundle fuel, insurance, rego, servicing, and tyres into one pre-tax payment. No more bill shock - everything's covered and tax-effective.
Salary package brand new cars or quality used vehicles. Even refinance your existing car into a novated lease for instant tax savings.
Change jobs and take your novated lease with you. New employer just needs to agree to continue the payroll deductions (most do).
Most novated leases are 100% financed. Your tax savings from day one effectively fund the deposit over the first few months.
See how much you'll save with salary packaging. Get a personalized quote in 5 minutes.
Select any new or used car from any dealer or private seller. You have complete freedom - unlike some company car schemes with restricted options.
Kreddi partners with specialist novated lease providers. We structure the lease, arrange finance, and create your quote showing exact savings.
Your employer signs a simple agreement to deduct lease payments from your pre-tax salary. Takes 10 minutes, zero cost or admin burden for them.
Lease begins, payroll deductions start (pre-tax), and you immediately see 30-45% savings vs buying the same car normally. All bills (fuel, insurance, etc) go through the lease provider.
After 1-5 years: (1) Pay residual and keep the car, (2) Trade up to a new vehicle with new lease, or (3) Return the vehicle. Most people upgrade every 3-4 years.
Employee earning $90,000/year (32.5% tax bracket) financing a 2026 Toyota RAV4 GXL Hybrid
Highest marginal tax rate (37-47%) means maximum tax benefit. Can afford premium vehicles and benefit from GST savings on $60k+ purchases.
32.5% tax bracket still delivers substantial savings. Most popular novated lease demographic. Sweet spot for $30k-$50k vehicles.
Drive 25,000+ km annually? Bundled fuel costs are pre-tax, maximizing savings. $6,000/year fuel bill becomes $3,500 after-tax equivalent.
Large employers often have master lease arrangements with better rates. Public servants get excellent novated lease terms.
PAYG employee (not contractors/ABN holders)
Requires payroll deduction capability
Employer must agree to facilitate lease (most do)
They deduct from your salary, no cost to them
Typically $50,000+ gross income
Need sufficient tax being paid to benefit from savings
Normal credit assessment like any vehicle finance
Lease provider needs to approve your credit
New or used (typically up to 12 years at lease end)
Vehicle must last the lease term reliably
Novated leases only work for employees on PAYG (pay-as-you-go) payroll. Contractors, sole traders, and ABN holders cannot salary sacrifice. If you\'re self-employed, consider a Chattel Mortgage for similar tax benefits.
My employer pays for the car
No. You pay for everything, but with pre-tax dollars instead of after-tax. Your employer just facilitates payroll deductions at zero cost to them.
I can't salary package a used car
You absolutely can. Novated leases work for quality used vehicles up to 12 years old at lease end. Save even more by buying used.
I lose the tax benefits if I change jobs
Leases are portable. Take it to your new employer - they just need to agree to continue the payroll deductions (98% do). If they decline, you can convert to a standard car loan.
My employer has to approve specific vehicles
Unless your employer has a specific policy (rare), you choose any vehicle. Some employers exclude utes for non-work use, but most have no restrictions.
It's only worth it for expensive cars
False. Novated leases work brilliantly for $25k-$35k vehicles. The tax savings and GST discount are percentage-based, so any price point benefits.
Typical savings are 30-45% of total vehicle running costs (purchase + running costs) depending on your income tax rate. Breakdown: Income tax savings (20-30% of total costs depending on your marginal rate), GST savings (10% of purchase price and running costs), fleet discounts (some lease providers negotiate dealer discounts), bundled costs (streamlined servicing and insurance rates). For example, a $40,000 car costing $17,000/year to run might cost you only $11,000-$12,500/year net with a novated lease. That's $4,500-$5,500 annual savings, or $22,500-$27,500 saved over a 5-year lease.
FBT is a tax employers pay on non-cash benefits provided to employees. For novated leases, you usually elect to pay the FBT yourself (called "Employee Contribution Method") so your employer doesn't have to. Your lease provider calculates the FBT based on your vehicle's value and your estimated private use percentage. Important: Electric vehicles (EVs) under $91,387 are FBT-exempt since July 2022, making EV novated leases exceptionally tax-effective (potentially 45-55% total savings). For standard petrol/diesel vehicles, FBT is around $2,000-$5,000/year depending on vehicle value, but this is more than offset by the tax savings you gain.
Yes, through a process called "sale and leaseback." Here's how it works: (1) A novated lease provider "purchases" your existing vehicle from you, (2) They immediately lease it back to you under a novated lease arrangement, (3) Your employer agrees to the salary packaging arrangement, (4) You start receiving immediate tax savings on your existing car. This works even if you have an existing car loan - the lease provider can refinance it. Vehicle must be in good condition and typically less than 10 years old. This is an excellent option if you already own a car and want to start salary packaging immediately.
You have three options: (1) Portable to new employer (most common): Take your lease to your new employer - they simply sign the agreement to continue payroll deductions. 98% of employers agree as there's no cost or liability to them. (2) Convert to post-tax: Continue making payments from after-tax income (loses tax benefits but keeps the car). (3) Terminate lease: Pay out the residual value, sell the car, or return it to the lease provider (may incur early termination fees of $500-1,500). Most lease agreements allow portability, and given how common novated leases are (200,000+ Australians have them), new employers are very familiar with continuing existing leases.
No, absolutely not. Common employer concerns addressed: They pay nothing (you pay for everything via salary deductions), they have no financial liability (lease is between you and the provider), they take on zero risk (if you leave, lease goes with you or terminates), their admin burden is minimal (just process one payroll deduction line item), they face no FBT liability (you elect to pay FBT yourself). The lease provider typically indemnifies employers against any liability. This is why 85-90% of Australian employers participate in novated leasing - it costs them nothing, takes minimal admin, and is a popular employee benefit.
A fully maintained novated lease typically includes: Vehicle finance (purchase price bundled into lease), fuel (fleet card provided, all fuel costs bundled), insurance (comprehensive coverage arranged), registration and CTP (annual rego costs included), servicing and maintenance (scheduled services covered), tyres (replacement tyres when needed), roadside assistance (24/7 coverage), and lease management (provider handles all administration). You get one simple pre-tax payment that covers EVERYTHING. No more separate bills. Alternatively, choose "finance only" novated lease (excludes running costs but still gets tax benefits on vehicle payments). Most people choose fully maintained for maximum convenience and tax efficiency.
Minimum salary around $50,000 gross provides meaningful tax savings (19-32.5% marginal rate). Below $50k, tax savings are smaller but GST savings (10% on purchase) still make it worthwhile. Maximum salary has no cap - higher earners (marginal rate 37-47%) benefit most from tax savings. Sweet spot is $70k-$180k where you pay significant tax but not so much that you're restricted to very expensive vehicles. That said, even earners above $180k benefit substantially from novated leasing, especially for prestige vehicles where the GST savings alone can be $6,000-$10,000 on a $70k-$110k purchase.
Novated lease wins for PAYG employees who qualify, regular car loan wins for others. Choose novated lease if: you're a PAYG employee (not contractor), earn $50k+ gross income, employer agrees to facilitate (most do), plan to keep vehicle 3-5 years, drive significant kilometers (maximize fuel savings). Choose regular car loan if: you're self-employed/contractor (not eligible for salary packaging), prefer simpler finance (just car + loan, no bundled costs), want to own the car outright faster (no residual), dislike the idea of involving your employer. Financial comparison: $40k car over 4 years might cost $17,000/year with novated lease (after tax savings) vs $20,000+/year with regular loan (no tax benefits). That's $12,000+ saved over the lease term.
Save 30-45% on vehicle costs. Get your personalized novated lease quote.