A novated car lease is like a standard car lease but it is financed through salary packaging through your employer. The lease payments are made from your pre-tax income which your employer makes on your behalf. The lease payments include GST. As a novated car lease is taken from your pre-tax income it reduces the amount of tax you pay. As with a standard car lease there is a residual value at the end of the lease term which is to be paid to the financier. The lump sum can be re-financed, paid to own the car outright or you may wish to trade-in the vehicle.

With a novated lease you can choose your own vehicle and organise a lease through an external supplier or your employer may already have a company they use. A Deed of Novation is signed for the term of the lease which means your employer has the obligation of making the lease payments on your behalf from your pre-tax income.

Your employer takes responsibility of the lease payments whilst you are in their employ but ultimately you are responsible for the lease, therefore, if you change employment and your new employer does not salary package you are responsible for the lease repayments.