What is a novated lease? Including fully maintained novated leases

Last updated 3 November 2026 · Reviewed by 360 Asset Finance Compliance

How does a novated lease work?

You choose a car, and a finance provider buys it and leases it to you. You, your employer and the finance provider then sign an agreement, called a novation, under which your employer makes the lease payments from your pay while you work there. Depending on the arrangement, part of each payment may come from your pay before tax and part after tax. The finance provider owns the car during the lease, and you can use it for personal use.

What's usually included?

Every novated lease includes the finance for the car, with regular lease payments and a residual amount set at the start and due at the end. If the lease is fully maintained, it also includes the running costs you choose. Fees and charges apply and differ between providers, so ask what's included and the total cost before you sign.

What is a fully maintained novated lease, and how is it different from finance-only?

A fully maintained novated lease, sometimes called a fully serviced novated lease, bundles the running costs of the car into your salary packaged payments. Depending on the provider, this can include:

• servicing and maintenance
• tyres
• registration
• insurance
• fuel, or charging for an electric vehicle.

The provider usually estimates these costs and spreads them across your payments. If your actual costs differ, the budget may be adjusted. Your agreement should explain what happens to any amount that isn't used.

With a finance-only (non-maintained) novated lease, only the car's lease payments go through salary packaging. You pay running costs yourself as they come up.

A fully maintained lease can make budgeting simpler, with most costs in one regular payment. A finance-only lease gives you more control over running costs. Which suits you depends on your circumstances and your employer's arrangement.

What happens at the end of the lease?

At the end of the lease, the residual (also called a balloon), a lump sum set at the start, is due. In general, your options are to:

• pay it out: pay the residual and own the car
• refinance it: finance the residual, which may mean starting a new lease on the same car
• upgrade: sell or trade in the car, use the proceeds towards the residual, and start a new novated lease on another car.

The car may be worth more or less than the residual. If it's worth less, you'll need to cover the difference, so plan for it from the start.

What happens if I change jobs?

The lease generally stays with you, not your old employer. If your new employer offers novated leasing, the lease may be transferred to them under a new agreement, and payments continue through your pay. If they don't, you generally take over the payments yourself, from your after-tax pay, or you may be able to pay out the lease. Check your agreement before you sign.

Who can get a novated lease?

A novated lease is generally available to employees whose employer offers salary packaging or novated leasing. Not every employer does, and some have their own rules about who can take part, so check with your employer first.

Self-employed people and sole traders generally can't use a novated lease, because there's no separate employer to make payments from their pay. If that's you, a car loan, or a chattel mortgage for a car used mainly in your business, may be an option. Our guides on car loans and on asset finance structures, linked below, explain these. In every case, the lender will assess your application against its criteria.

How is a novated lease treated for tax?

The tax and fringe benefits tax treatment of a novated lease depends on your circumstances, the car and the arrangement. We don't give tax advice, so ask your employer's salary packaging provider or your accountant before you decide.

How can 360 Asset Finance help?

360 Asset Finance is a broker, not a lender. We can help with novated leases through our lender panel, so you're not tied to one lender. Your employer needs to offer salary packaging, and finance is subject to the lender's assessment.

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General information only. It doesn't take into account your objectives, financial situation or needs, and it isn't credit, tax or legal advice. Finance is provided by the lender you choose and is subject to its lending criteria; fees and charges apply. 360 Asset Finance is a trading name of Kuone Consulting Pty Ltd (ABN 75 647 329 002), Australian Credit Licence 566705.