A novated lease is a car lease arrangement that involves three parties: the employee, the employer, and the lease company. In this arrangement, an employee leases a car from the lease company, and the employer agrees to take on the employee’s lease obligations. The lease payments are then deducted from the employee’s pre-tax salary, potentially lowering their taxable income.

In a novated lease, the employee chooses the car they want to lease, and the employer makes the lease payments on behalf of the employee directly to the lease company. These payments are typically made from the employee’s pre-tax salary through salary packaging. The arrangement is documented in a novation agreement among the three parties. See our How It Works page.

A novated lease and a car loan serve similar purposes but operate under different financial mechanisms. When you finance a car through a loan, the payments are made with your post-tax income, meaning you cover the loan costs with money that’s already been taxed. On the other hand, a novated lease arrangement allows for the lease payments to be deducted from your pre-tax salary. This means you make these payments before any taxes are applied to your income, effectively reducing your overall taxable income. As a result, the tax savings you achieve with a novated lease generally surpass the interest costs associated with the lease, making it a financially advantageous option in the majority of scenarios.

The main benefits include potential tax savings, as lease payments are made from pre-tax salary, reducing taxable income. It also offers convenience and budgeting benefits, as it will cover not just the lease payments but often other vehicle-related expenses like electricity, maintenance, tyres and insurance, all bundled into one regular payment.

Most employees in Australia can take advantage of a novated lease if their employer offers it as part of their salary packaging options. If your employer currently doesn’t offer it, we are happy to discuss it directly with a company owner or finance manager. It is very simple to set up and easy to manage. Some employers may already have specific salary sacrificing partners.

At the end of a novated lease term, the employee typically has several options: they can return the vehicle to the lease company, extend the lease, or purchase the vehicle for the residual value agreed upon at the start of the lease.

Yes, you can choose a new or used car, including selecting the make and model, subject to approval by the lease company and your employer. However, some employers or lease companies may have restrictions on the type of vehicle that can be leased.

However, we recommend an electric vehicle (EV), plugin hybrid electric vehicle (PHEV) or fuel cell electric vehicle (FCEV) that is newer than July 2022, as those are FBT exempt.

WhipSmart has adopted a customer-first approach, ensuring our services and solutions are tailored to meet individual needs and preferences. We prioritise your satisfaction above all, offering personalised support and guidance throughout the leasing process to ensure it aligns with your specific requirements.

We stand out by being completely transparent about our fees and charges. From the beginning, you’ll have a clear understanding of all costs associated with your novated lease, without any hidden fees. This transparency ensures you can make informed financial decisions without any surprises.

Our state-of-the-art website includes advanced profile management tools that allow you to easily track and manage your accrued funds. It simplifies the process of claiming payments, providing a user-friendly interface for seamless management of your leasing account.

We work closely with you to find the best deal on your car. Our team conducts comprehensive market research to ensure you get the most value for your money. We negotiate on your behalf, leveraging our industry connections and expertise to secure competitive pricing and favorable terms.

We aim to make the process of buying, owning, and upgrading your electric vehicle as easy as upgrading a mobile phone. Our services are designed to support the unique needs of electric vehicle owners, from facilitating the initial purchase to managing ongoing maintenance and preparing for future upgrades. We provide guidance on incentives, charging infrastructure, and other key aspects of electric vehicle ownership to ensure a smooth and enjoyable experience.

Our comprehensive support for electric vehicle ownership includes assistance with installation of home charging stations, advice on maximising government incentives, and tailored maintenance packages. We’re committed to helping you transition to and enjoy the benefits of electric vehicle ownership, making it a convenient and eco-friendly choice.

By focusing on customer-first principles, transparency, innovative technology, and a commitment to electric vehicles, our company strives to deliver a superior novated leasing experience. We’re dedicated to making the process of leasing a vehicle as straightforward and beneficial as possible, setting us apart in the industry.

While novated leases can offer financial benefits, there are risks to consider. These include the commitment to ongoing payments, which continue even if employment circumstances change, and potential end-of-lease costs if the car’s market value is less than the residual value or if there are excess kilometer charges and wear and tear fees.

Novated lease payments made from pre-tax income can reduce an employee’s taxable income, potentially leading to tax savings. However, it’s important to note that the value of the benefit might be added back for superannuation guarantee calculations or other purposes. Consulting with a financial advisor or tax specialist is recommended to understand the specific impacts. Most importantly though, a novated lease helps you save on your income tax over the life of the lease. In addition, WhipSmart specialises in the leases of electric vehicles, which are currently exempt from Fringe Benefits Tax (FBT).

A novated lease may be right for you if you’re looking for a cost-effective and tax-efficient way to own a car. It’s suitable for individuals who want to bundle vehicle costs into one convenient payment, potentially reduce taxable income, and enjoy the flexibility of choosing their vehicle.

The benefits of a novated lease can vary based on your income level. Higher income earners might find greater tax benefits due to the reduction in taxable income. It’s advisable to consult with a financial advisor to understand how a novated lease could affect your specific tax situation.

Typically, a novated lease arrangement requires an employer to agree to the salary packaging arrangement, as the lease payments are made from your pre-tax salary through your employer. If you’re self-employed or do not have an employer who offers novated leasing, you might need to explore alternative financing options.

While a novated lease can offer immediate tax benefits and convenience, it’s essential to consider the long-term implications, including the total cost of the lease with interest, the residual payment at the end, and any potential end-of-lease charges. Evaluating these factors can help determine if a novated lease is financially beneficial in the long run.

Comparing a novated lease to buying a car with cash or a loan involves assessing upfront costs, ongoing expenses, tax implications, and ownership aspirations. A novated lease can offer tax benefits and include vehicle running costs, while buying outright or with a loan provides immediate ownership but lacks the tax advantages of leasing.

If you leave your job during the lease term, you typically have several options, such as transferring the lease to a new employer, continuing the lease payments yourself after-tax, or terminating the lease early, which may incur additional costs.

A residual or balloon payment is a lump sum payment due at the end of a novated lease term. It represents the remaining value of the vehicle and must be paid to finalise the lease agreement or to take ownership of the car.

The residual value is predetermined at the beginning of the lease based on the Australian Taxation Office (ATO) guidelines, which specify minimum residual values as a percentage of the vehicle’s initial value, depending on the lease term.

Residual payments are used to lower the monthly lease payments throughout the term of the lease, making the vehicle more affordable on a month-to-month basis. It reflects the estimated market value of the vehicle at the end of the lease.

Yes, in many cases, you can either refinance the residual amount into a new lease or take out a loan to pay off the balloon payment, allowing you to keep the car.

If you’re unable to afford the residual payment at the end of your lease, options may include refinancing the residual amount, trading in the vehicle, or discussing other arrangements with your lease provider.

The residual value is set according to ATO guidelines and agreed upon at the start of the lease, making it difficult to reduce after the lease has commenced. However, choosing a shorter lease term can lead to a higher residual percentage, potentially affecting overall costs.

While the monthly lease payments can reduce your taxable income, the residual payment itself does not directly affect tax benefits. It’s a payment for the vehicle’s value at lease end and doesn’t influence the tax advantages gained during the lease term.

The main risk is the vehicle’s market value being lower than the residual value at the end of the lease. If you choose to sell the car rather than pay the residual, you might end up covering the difference out of pocket.

Generally, the residual value is based on ATO guidelines and not subject to negotiation. However, you can choose a lease term that aligns with your financial goals and the expected depreciation of the vehicle.