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Novated Lease Frequently Asked Questions

What is a Novated Lease?

A novated lease is a three way agreement ("novation agreement") between an employer, employee and lease company, under which the employee leases a vehicle from the lease company, and employer agrees to take on the employee's obligations under the lease.

Normally, the employer then makes the lease payments on behalf of the employee, and deducts them out of the employee's pre-tax income (known as salary packaging a vehicle).

What are the benefits of a Novated Lease to employee?

Benefits of a novated lease to employee include:
  • Employee's car of choice, registered and insured in the name of the employee
  • Employee does not have to be the main driver, and no business use required.
  • Employee can Novate one or more cars, and also have a company provided car at the same time.
  • Potential for significant income tax savings, as a portion of the weekly car costs are deducted pre-tax.
  • Savings on GST on all of the running and finance components.
  • Financier pays the GST on the purchase price of the car, adding to the employee savings.
  • Access to applicable volume fleet discounts due to Fleet Choice's buying power.
  • Vehicle stays with the employee and can be transferred to a new employer.
  • Provides employees with a tax effective mechanism to structure their salaries.

Who Pays the FBT?

You, the employee pay the FBT via post tax deductions from your pay. This is known as an employee deduction.

If I change my job what do I need to do?

You need to advise Fleet Choice as soon as you know you are going to change jobs. Your new employer may agree to continue salary packaging your car on the same basis, or alternatively the employee simply continues to make the lease payment on the car from the post tax (take home pay) salary, but you will not be able to package your car costs pre-tax.

What is the residual payable?

All Novated Leases have a residual value or loan balance at the end of the finance term of the lease. This is an Australian Tax Office requirement. This is a percentage of the cost price and is itemised at the commencement, and doesn't change over the term. The payments over the term reduce the loan balance down to the residual. The payments each month are structured in this way, so note; you are not paying off the car, and then paying a residual. At the end of the term when the residual is payable you can: Trade-in the car, sell the car privately, payout the residual or refinance the residual and continue the novation.

Can I use the car for private use?

Yes, the vehicle may be leased for 100% private use, and you do not have to be the main driver.

Can I buy any car and Novate it?

Any new car can be Novated with Fleet Choice. Used cars are available to be novated but have an age limit of 5 years old and 120,000km's travelled at the commencement of the novation.

Should I seek my own independent financial advice?

Circumstance can differ for employees, and as such Fleet Choice recommend employees check with their own financial adviser to ensure salary packaging is a suitable option.

Do I need insurance?

Yes, as with all vehicle finance, comprehensive motor insurance with FLEET CHOICE as an interested party is required. A paid in full certificate of currency is required before any vehicle settlement will take place. Employees can utilize Fleet Choice insurance option, or select their own provider.

What insurance is there to protect me if I take out a Novated Lease?

There are three insurance products that Fleet Choice offers:
  • Comprehensive Motor Insurance - all Novated Lease customers are required to have insurance with 'Financier' as an interested party.
  • GAP Insurance - this insurance covers you for the difference between the vehicle value if written off and the lease payout figure.
  • Lease Protection Insurance - Provides up to 3 months lease payments in the event of involuntary redundancy.

What happens if I spend more or less on petrol and other car expenses than I thought I would?

We regularly monitor your spending patterns and Fleet Choice will suggest you repackage your car expenses if necessary, to maximize your tax savings throughout the term of the Novation.

How do I get started or obtain more information?

You simply log on to the Fleet Choice web site and hit on calculators, commercial on the lower right hand side of the home page. You can enter the information for the car you would like to salary package, and forward to Fleet Choice, or call Fleet Choice directly on the number below.

How long will the process take?

Fleet Choice will obtain firm pricing for your consideration, and provide a specific salary packaging quotation for you, without obligation. Allow 1-2 working days for the fleet pricing and detail to be emailed to you.

Should you wish to proceed, the documentation can be turned around within 1-2 working days, and delivery of your vehicle is subject to the availability of the particular car of your choice.