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How novated lease works
Frequently asked questions
What is a novated lease?
A novated lease is an arrangement between you, your employer and a financier for a period of time, between one to five years. You can still leave your employer during that time. If you do, you have the options to pay your car off, pay the financier directly or alternatively, you may be able to take the lease with you subject to your new employer’s approval.
Your employer makes before-and-after-tax deductions (known as salary sacrificing) to pay for your car and running costs, helping to save money on tax.
When you decide on a novated lease with Flare, we’ll arrange everything for you from identifying and sourcing the car at a great price through our network, helping you apply for finance, to buying your car and having it delivered. We’ll manage the arrangement with you and your employer. It’s that easy.
How does residual value work?
You don’t pay the car off in full over the term of the lease as there must be a ‘residual value’’ amount remaining at the end of the lease period. The amount unpaid is owed at the end of the lease. This is determined using a methodology set out by the Australian Tax Office. When you come to the end of your lease, you have plenty of options:
Trade-up your car and upgrade with a new lease
Re-lease your car and pay the residual amount
Payout the residual amount and own the car outright
Sell the car and use the proceeds to pay the residual amount
Can I change jobs with a novated lease?
You are not tied to your employer because you have taken up a novated lease. If you move on, you have the options to pay your car off, pay the financier directly or alternatively, you may be able to take the lease with you subject to your new employer’s approval.
Can I buy an EV car with a novated lease?
Yes, you can get a novated lease for an electric vehicle and plug-in hybrid with Flare. Our car experts can help you benefit from the significant saving advantages of a novated lease while you help the planet.
When you go electric, you’ll save on fuel and maintenance compared to an internal combustion engine vehicle.
These savings could be amplified even more with a novated lease. Eligible electric vehicles and plug-in hybrids are now exempt from the 47% fringe benefits tax – only if provided through a novated lease. The vehicle must be at first sale less than the luxury car tax threshold for fuel efficient vehicles which is $84,916 as of the 1st of December 2022.* Find out more.
*While vehicles are exempt from paying FBT, there will be reportable fringe benefits for employees.
Do I need to drive a lot to benefit from a novated lease?
This is no longer the case. The Federal Government changed legislation a few years back which made the benefit of leasing universal regardless of kilometres driven. So, it doesn’t matter how much you drive per year, you will still save money. The only thing kilometres impact are your running cost budgets for fuel, servicing and so on.
What if my car's actual running costs are different to what Flare has budgeted?
Flare will try and make sure that your budgets are as accurate as possible, however if your expenditure exceeds what we are taking in budgets – we will contact you about increasing your deductions. Also, if we are taking too much and your actual running costs are less than what we have budgeted then we can look at reducing your budgets.
Terms and conditions
*Costs are estimates only based on Gross Annual Salary of $85K, 60-month lease, 15,000km p.a., vehicle purchased in NSW with potential discounts, typical running cost inclusions and tax considerations.
^Your actual savings are dependent on your personal circumstances, and tax exemptions are subject to eligibility.
Information provided is general in nature. We have not taken into account your personal circumstances or financial objectives. We recommend seeking independent legal, financial or other professional advice before making any decisions related to this information.