I already have a car, can I get a novated lease?

If you’re wondering if you can bring your existing car to a novated lease, you can – it’s called a sale & leaseback. A novated lease doesn’t have to be for the purchase of a new or used car and a good novated lease provider will be able to advise you on your options for existing vehicles. So, what are the considerations and how does it work? We’ve got you covered.

What is a novated lease?

A novated lease lets you pay for your car and running costs from your salary. If you’re familiar with salary sacrificing, it follows the same process. Salary sacrificing your car via a novated lease has a few key advantages:

1. You can utilise you pre-tax (gross) income to pay for your car and all running costs – rego, fuel, servicing, insurance, roadside assistance – in one simple payment

2. You can avoid paying GST on your car and running costs

3. When you get a new car on a novated lease, you can access fleet (wholesale) pricing

For this last point alone, it’s worth considering how much you want to use your existing car. If you love your car but not enough to miss out on the chance to get a new car at a highly discounted price, it’s a good idea to weigh up whether a new car is a better option. After all, a new car will have full warranty and stronger resale value. If you’d like to understand novated leasing in more detail, our “What is a novated lease?“ article can help.

Sale and leaseback considerations

There are three key things to consider when bringing your existing car to a novated lease:

1. You need to be employed and paid via PAYG (most people are).

2. Your employer needs to be set up for novated leasing (if they’re not, we can help).

3. You won’t save GST on the car itself (though you will still save GST on your running costs).

Why get a sale and leaseback?

If you love your car but you want to free up some cash, a sale and leaseback is a great way to do this. You can take advantage of the tax benefits of a novated lease mentioned previously and pay less tax. And who doesn’t want to do that?

The great thing about a sale and leaseback is that, if you ever decide you don’t want to keep your current car anymore, you’ll have plenty of options to continue benefiting from the tax savings of a novated lease. Once your lease ends and you’ve made all payments, it’s easy to upgrade your car on a new lease (more on this below).

How sale and leaseback works

With a sale and leaseback arrangement, your novated lease provider arranges for a lender to purchase your car and loan it back to you, so you can free up cash. More specifically:

1. The lender pays you the value of your existing vehicle (or they payout your existing finance agreement).

2. You’ll discuss the lease term you’d like to take on with your novated lease provider (usually anywhere between 12 and 60 months). 

3. You’ll also decide on a residual value you’re comfortable with – the residual is the balance remaining at the end of your lease. A residual is a mandatory requirement from the ATO, and exists to prevent lessees paying no tax (which technically would otherwise be possible).

4. Once some short(ish) paperwork is signed, your novated lease provider sets up your sale and leaseback agreement and tells your employer how much to pay on your behalf each month. 

What happens at the end of the lease?

Once the lease ends, you have options:

1. You can upgrade: you sell your car, pay the residual, pocket any profit tax free and you can start a new lease with a new (and better) car. Your novated lease provider will ensure that your regular payments are similar and you’ll continue to receive the same tax-saving benefits; or

2. You can pay the residual and own your car; or

3. You can sell your car and pay the residual – and, again, you’ll pocket any profit, tax free. 

We have decades of experience at finding the best novated lease package for each unique situation. As the helpful novated lease provider, we like to educate on the process and ensure that people are informed. We can also offer independent advice on the right vehicle to suit your needs.

Get in touch

If you’re not sure whether a sale and leaseback is the best choice for your individual circumstances, give us a call on 1300 888 594, or you can request a callback. If you prefer you can send us a message and we’ll message you back.