About Novated Leasing
Novated leasing is an ATO-approved way to drive the car you want while potentially reducing your income tax. It’s a three-way agreement between you, your employer, and a finance provider—Prosperity Smart Drive handles the setup and administration, making the process seamless for you.
Use our Novated Lease Calculator to find out if your employer offers novated leasing and see how much you could save.
Lease It, Love It: A Smarter Way to Drive
How does novated leasing work?
Like other types of vehicle finance, novated leasing involves regular payments over a fixed term, with a final residual (or balloon) payment due at the end. The arrangement is a three-way agreement between the employee, employer, and financier — each playing a key role:
The Employer
Commits to making automatic payroll deductions from the employee’s pre-tax salary. At Prosperity Smart Drive, our team supports the setup process to ensure a smooth implementation.
The Employee
Authorises pre-tax salary deductions in exchange for the use of the vehicle, which can be used for either personal or business purposes.
The Financier
Sources the vehicle, establishes the lease, and handles the administrative, contractual, and compliance responsibilities associated with the lease.
Novated Lease vs Car Loan vs Paying Cash
Car salary packaging through a novated lease is a smart and flexible alternative to traditional car financing or paying upfront in cash. Here’s a quick comparison to help you understand the differences:
Novated Leasing
You own the car from the start, and the lease is paid using your pre-tax salary through a salary sacrifice arrangement. Regular payments are deducted from your income each pay cycle and cover the lease cost plus most running expenses—such as fuel, maintenance, insurance, and registration. The car is available for 100% personal use. A final residual payment is due at the end of the lease term.
Car Loan
You borrow money from a lender to purchase a car, then repay it over time with interest. You own the car from day one, but you’re responsible for all ongoing costs including insurance, maintenance, fuel, and registration. Loan repayments are made from your after-tax income and the interest is not tax-deductible for personal use.
Paying Cash
You pay the full cost of the car upfront using your own savings. There are no loan repayments or interest charges, and you own the car outright immediately. However, this method ties up a large amount of capital and you’re still responsible for all running costs, with no tax advantages for personal use.
