Novated Lease vs. Car Loan. What’s the difference?

Buying a new car is often a significant out of pocket expense. If you haven’t saved up enough cash to buy your car outright, you may be considering taking out a car loan. But what if there was a better way?

Novated leasing comes with inclusions that a typical car loan doesn’t offer. If you’re in the market for a new car, it’s worth considering both options before making a decision.

What is a Novated Lease?

First, let’s cover salary packaging. Salary packaging uses your gross income (your pre-tax earnings) for payments to help you maximise your money on things like your rent, mortgage, and more.

A novated lease is a type of salary packaging. It’s an arrangement that you can make with your employer, where you agree to set aside some of your pre-tax salary to pay for a car of your choice and all of the running costs that come with it. The main benefits are the reduction of your taxable income (more money in your pocket) and packaging all running costs into one simple payment.

In short, it’s an easy and cost-effective way to finance a new or used car.

Benefits of a Novated Lease

Maximise your take-home pay

  • Reduce your taxable income by salary packaging a portion of your weekly, fortnightly, or monthly gross salary towards your novated lease.

Get the best deal with our networks and buying power

  • Instead of shopping around at your local dealerships, you can leave it up to us to arrange the best car at the best price possible for you.

Stress less with all your running costs covered

  • Fuel, insurance, servicing, tyres, and registration are all budgeted for and included in your lease payments.

Save on GST

  • By salary packaging, you won’t need to pay GST on your car’s purchase price or running costs.

Get more leasing options and flexibility

  • We provide you with different options throughout your lease term. Whether you want to purchase, sell, or refinance at the end of the lease, the choice is yours.

What is a Car Loan?

A car loan is a personal loan that serves the purpose of purchasing a new or used vehicle and can be secured or unsecured. With a secured car loan, the vehicle you purchase is considered the collateral and provides more security to the lender (where you got the loan from) because they can repossess and sell the vehicle if you fail to pay on time. Interest rates are usually fixed meaning your repayment amounts will stay the same.

An unsecured loan is riskier for the lender because the vehicle is not considered collateral and cannot be repossessed. As a result, unsecured car loans generally come with higher interest rates and there are other legal means through which the lender can come after you if you fail to make payments.

So What’s Better?

The benefits are clear – with a novated lease you can save thousands compared to a traditional car loan. Not only do you save by paying less GST, but all the running costs of the vehicle are included in one easy payment:

  • Registration
  • Fuel
  • Finance
  • Tyres
  • Insurance
  • Servicing

Get A Quote

If you’re interested in discussing how a Novated Lease may work for you, fill out our Get A Quote form and our team will be in touch within 4 business hours.

Meet Ryan!

Ryan earns $50,000 per year and is looking at buying a new car valued at $30,000. Through a novated lease with Fleet Network, the cost of the vehicle is reduced (as GST is not included),and finance and running costs are included in Ryan’s fortnightly repayments, saving him $7,841 over the term of his lease!

The table above is based on a 60-month term; a residual value of 28.13% as required by the ATO; an annual estimate for fuel, maintenance, tyres, registration, and comprehensive insurance. Car Loan finance figures are based on a variable comparison rate currently available with a major consumer bank and can vary depending on your personal circumstances. Before entering into a Novated Leasing arrangement, you should consider your objectives, financial situation and needs and seek appropriate financial advice based on your personal circumstances.


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