Smart Strategies: Novated Lease Repayment Tips You Should Know


In the ever-evolving world of personal finance and car ownership, novated leases have emerged as a compelling option for individuals seeking to save money while enjoying the convenience of having a vehicle. In this guide, we'll delve into the world of novated leases, helping you understand the intricacies of this financial arrangement and the significant benefits it offers to Australian residents.

Do You Actually Save Money with a Novated Lease?

Novated leases have become an attractive alternative to traditional car ownership in Australia. However, the burning question for many is whether they truly save money with a novated lease. Let's dispel the myths and uncover the financial realities behind this appealing option.

Debunking Common Myths

Novated leases are often met with scepticism, primarily due to misconceptions about their cost-effectiveness. One common myth is that novated leases are only suitable for high-income earners. In truth, novated leases can benefit individuals across various income brackets.

Another misconception is that novated leases lock you into long-term commitments. While these leases typically last several years, they offer flexibility and options for early termination.

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    Cost Comparison: Novated Lease vs. Traditional Car Ownership

    To determine if novated leasing saves you money, comparing it with traditional car ownership is crucial. Traditional car ownership entails several expenses, including upfront costs, registration, insurance, and ongoing maintenance. Novated leasing streamlines these expenses into manageable payments, potentially reducing your financial burden.

    Moreover, novated leases provide access to fleet discounts, often resulting in savings on the vehicle's purchase price. This can be particularly advantageous for those looking to buy a new car.

    Realising Tax Benefits

    One of the key financial advantages of novated leases is the potential for significant tax savings. When you enter a novated lease arrangement, your vehicle expenses become pre-tax deductions from your salary. This effectively lowers your taxable income, leading to reduced income tax.

    Additionally, the Goods and Services Tax (GST) on the vehicle's purchase price and running costs is generally claimable, further enhancing your potential savings. However, working with a financial advisor or tax specialist to optimise these benefits while complying with tax regulations is essential.

    How Do You Save Money on a Novated Lease?

    Saving money on a novated lease requires strategic decision-making and careful financial planning. Here are the steps to maximise your savings potential:

    Choosing the Right Car

    Selecting the right vehicle plays a pivotal role in your novated lease experience. Consider factors such as fuel efficiency and resale value. Opting for a fuel-efficient car will save you money on ongoing running costs, while a vehicle with good resale value will result in a higher payout if you choose to sell it at the end of the lease term.

    Negotiating the Lease Terms

    Pay close attention to the lease terms when setting up your novated lease. Adjust the lease period to align with your preferences and requirements. Additionally, negotiate the kilometre allowance to ensure it accommodates your anticipated usage without incurring excessive fees for exceeding the limit.

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    Tracking Your Expenses

    To save money, keep a vigilant eye on your expenses. Monitor and budget for maintenance and repair costs to prevent unexpected financial setbacks. Stay organised by documenting your fuel and running costs, which will be essential for claiming tax benefits at the end of the financial year.

    Maximising Tax Benefits

    The core financial advantage of novated leases lies in tax savings. To maximise these benefits, engage in salary packaging, which allows you to allocate a portion of your pre-tax salary to cover your lease costs. This effectively reduces your taxable income and, subsequently, your income tax liability.

    Additionally, explore the potential GST savings on the vehicle's purchase price and running costs. GST savings can provide a substantial financial boost when leveraged effectively.

    Considering Fuel Cards

    Some novated lease providers offer fuel cards as part of their package. These fuel cards often come with discounts at fuel stations, making it more cost-effective to fill up your vehicle's tank. Be sure to inquire about this option when setting up your novated lease to potentially save on your monthly fuel expenses.

    Can You Pay Off a Novated Lease Early?

    The prospect of paying off your novated lease ahead of schedule can be enticing, as it can lead to substantial savings. However, it's essential to understand the implications and options associated with early repayment.

    Understanding Early Repayment Options

    Paying off a novated lease early typically involves making lump-sum payments to cover the outstanding balance. Consult your lease provider to discuss the feasibility and terms of early repayment. You may have the flexibility to make additional payments as your financial situation allows.

    Another option is adjusting your salary sacrifice contributions to accelerate the repayment process. You can expedite the payoff timeline by allocating a larger portion of your pre-tax salary to the lease.

    Assessing the Financial Implications

    Before committing to early repayment, carefully evaluate the financial implications. While paying off your novated lease early can save you money on interest payments, it may also impact your cash flow. Consider your overall financial goals and budget constraints when choosing the best approach.

    Tips for a Successful Early Repayment

    If you decide that early repayment aligns with your financial objectives, follow these tips for a successful payoff:

    • Create a budget for your novated lease repayment and other financial commitments.
    • Prioritise saving for the lump-sum payment to clear the lease balance.
    • Consult with your novated lease provider to explore options and calculate the optimal strategy.

    Is Novated Lease Worth It for High-Income Earners?

    Novated leases can be especially appealing to high-income earners due to the potential for tax savings and financial flexibility. However, assessing whether this option aligns with your financial goals and lifestyle is crucial.

    Evaluating the Affordability

    While high-income earners have the potential to benefit greatly from novated leases, affordability remains a critical consideration. Examine your tax bracket, income stability, and overall financial health to determine whether a novated lease is feasible.

    Consider working with a financial advisor to conduct a comprehensive financial assessment considering your financial commitments and future goals.

    Assessing Lifestyle Factors

    Your daily commute and personal preferences also play a role in the suitability of a novated lease. If you commute long and prioritise driving a reliable vehicle, a novated lease may align well with your lifestyle.

    However, a novated lease may not be the most cost-effective choice if you seldom use a vehicle or prefer public transportation. Assess how a novated lease fits into your lifestyle and transportation needs.

    Identifying High-Income Strategies

    High-income earners can uniquely leverage novated leases to maximise their savings and tax benefits. Some strategies include:

    • Aggressive salary packaging to allocate a significant portion of pre-tax income toward lease expenses.
    • Exploring additional tax deductions for work-related vehicle expenses.
    • Investing surplus income in income-generating assets to further optimise financial gains.

    Potential Pitfalls for High-Income Earners

    While novated leases offer compelling advantages, high-income earners should be cautious of potential pitfalls:

    • Overcommitment: Aggressive salary packaging without proper budgeting can lead to overcommitment and cash flow challenges.
    • Missed Investment Opportunities: Focus on short-term tax benefits should not overshadow long-term investment opportunities that could yield higher returns.


    Novated leases offer a promising pathway to savings and tax benefits but require careful planning and consideration. By dispelling myths, making informed choices, and evaluating your financial situation, you can unlock the full potential of a novated lease. Whether you're a high-income earner or not, the key to success

    Are you in search of car loans? Look no further than Driva. We've established a robust network of over 30 lenders, allowing you to effortlessly compare your options. Discover the perfect solution tailored to your needs, all while benefiting from our transparent rates and fees. At Driva, transparency is our priority. Plus, you can complete your application 100% online for added convenience.

    Philana Kwan

    Philana Kwan is the marketing coordinator at Driva she has a demonstrated history in customer service excellence and is knowledgeable in all things car and finance related. When she’s not working Philana enjoys learning new things and keeping up with the latest trends in marketing and technology.

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