Novated Lease

A novated lease is and arrangement entered into by three parties, the employer the employee and the leasing company or financier. This enables the employee to lease a car of their choice within a negotiated salary packaging arrangement. Under the terms of a novated lease the employee leases the vehicle from the leasing company or financier, the employee then novates the vehicle to the employer.

This process results in certain obligations under the lease being transferred (novated) to the employer for the term of the novation.

Under this agreement the employer deducts the payment from the employee’s gross remuneration under a salary sacrifice arrangement and the employee enjoys unrestricted use of the motor vehicle. If the employee leaves the employer the novation will be cancelled by the employer and the employee will be responsible for the repayments from that time. An employee has the flexibility of renovating the lease with a new employer. Apart from the salary packaging benefits, other benefits of a novated lease include:

• The employee has the freedom of choice with vehicle selection
• The employer is not left with a fleet of unwanted vehicles when employees leave.

Obviously as a borrower you should seek advice from your accountant or financial adviser when considering the motor vehicle or plant and equipment finance option that best meets your needs.