When a novated lease is not for you
Novated leases are sold hard, and for many people they do cost less. But the saving is a tax saving, tied to your employer and your income, and there are plenty of situations where it shrinks, disappears or comes with strings that don’t suit you.
Signs a novated lease may not suit you
None of these rules a lease out on its own, but each one weakens the case for it:
- Your income is lower: the saving comes from paying with pre-tax salary, so it is worth less at lower tax rates.
- Your job is insecure, casual or likely to change: the lease follows your employer, and a gap or a move can mean paying it from your take-home pay.
- Your employer won’t package it, or charges fees that eat the saving.
- The car is a cheaper petrol car and you drive little: there is less to package, and fringe benefits tax takes back part of the saving.
- You want nothing owing at the end: a lease ends with a residual to pay, refinance or trade.
- The car is mainly for your own business: a business loan in the business’s name is usually the comparison to make.
- You’re about to go on unpaid leave: packaging pauses, but the payments don’t.
Things that are easy to overlook
The lease budget includes running costs, which makes the weekly figure look higher than a loan repayment. Compare like for like, running costs included on both sides.
A novated lease shows up as a reportable fringe benefit, which counts in some income tests, and lenders count the lease as a commitment when you apply for a home loan.
What to compare instead
A car loan in your name moves with you between jobs and can be paid off early. If you have a business, a business loan can carry GST credits and deductions for the business share. Navo prices all three on the same car, so you see where the lease wins and where it doesn’t.
Worked examples
Open an example in the Navo engine, add your own income, and see the figures for every way to pay.
A casual worker on a modest income
Packaging offered, a used petrol car, a job that may not last.
A sole trader with a work ute
Self-employed, ute used mostly for the business.
Questions
Is a novated lease worth it on a low income?
Often less so. The saving comes from tax, so it shrinks at lower tax rates. Compare a car loan on the same car before deciding.
Can I get out of a novated lease early?
Yes, by paying it out, which can include fees. Check the payout terms before you sign, especially if your plans might change.
Does a novated lease affect a home loan application?
Lenders count the lease as a commitment, and the reportable fringe benefit appears on your income statement. It doesn’t stop you borrowing, but it is part of the picture.
Reviewed 7 October 2026. General information only, not tax or financial advice. Tax savings depend on your circumstances.