Can I End My Novated Lease Early?
Can you end a novated lease early? Yes, but there may be payout costs, tax implications or smarter ways to exit. Here's what to know.
Ending your novated lease early is possible, but like any finance product, there are a few strings attached. Here’s what to expect.
First: You’re Breaking a Finance Agreement
A novated lease is a binding contract for a set period - you get savings for a set period, the finance provider gets security in expected payments for a set period. If you want to exit early, you're essentially terminating that promise with your financier, which usually means:
- Paying out the remaining balance of the lease
- Paying any early termination or admin fees
- Sometimes losing out on any residual value or planned tax benefits
What You'll Need to Pay
Expect a payout quote that includes:
- The remaining finance balance
- Any interest owed
- Fees (can vary by the finance provider)
- There is potential for a shortfall if your car’s value is lower than the payout
Why Do Early Lease Terminations Happen?
The most common reason a driver would end a lease early is due to a loss of job, or needing to change to a different car.
Your Options
- Payout the lease directly (and own the car)
- Transfer the lease to another eligible employer (we're happy to connect with the new employer and get them on board).
- Sell the car and use the funds to cover the payout
- Refinance or restructure the lease payout.
Some employers allow flexibility, others don’t. Always check your contract.
What If I Leave My Job?
If you resign or are made redundant, the lease doesn't disappear — it becomes your responsibility.
You’ll either need to:
- Take over the lease personally
- Find a new employer who will take it on, most employers are willing to do this as part of the job offer
- Pay it out
FBT and salary packaging benefits may also stop if your new employer doesn’t support novated leasing.
Important Considerations
- Your car may be worth less than the payout, depending on market value and timing
- You might lose tax savings if exiting early
Related Information:
The Luxury Car Charge is a salary deduction used to offset the extra tax your employer pays when you lease a car above the ATO’s luxury car depreciation limit. It helps them recover the shortfall from reduced tax deductions.
Please note, this is completely separate from the Luxury Car Tax (LCT).
FBT is a tax (with a rate at 47%) applied to fringe benefits (incentives beyond salary/wages received from an employer). A non-electric car under a novated lease is a fringe benefit (electric cars are completely FBT exempt in Australia).
The employer is responsible for paying the FBT, but at Clear Lease - we use the employee contribution method (contributing post-tax funds) to offset any FBT to zero.
Our regular novated lease package (fully-maintained) usually includes your car lease repayments, fuel/charging, servicing, maintenance & repairs, registration, insurance, and tyres - all bundled into a single pre-tax deduction.
No, when your employer leases the car, they claim the GST credit, meaning you don’t pay GST on the purchase price. The same applies to most running costs. You will, however, pay GST if you buy the car at lease end.
Yes, if you’d like to keep the car, you simply pay the residual value set at the beginning of the lease. You can pay this from your personal funds, or refinance it separately. Once paid, the car is yours. You can also sell or trade it in and start a new lease.
Yes, if your new employer supports novated leasing, you can transfer your lease by signing a new agreement. If they don’t, you’ll need to make private repayments, refinance, or consider ending the lease.
Your lease doesn’t end if you change jobs. You can either transfer it to your new employer, pay privately until the lease ends, or choose to end the lease early.
Cars that are too old, unroadworthy, imported, heavily modified, or intended for commercial use typically don’t qualify for novated leasing. Motorcycles are also excluded under current ATO guidelines.
Luxury Car Tax (LCT) applies to vehicles that exceed the government’s set price thresholds. For the 2024–25 year, it’s $76,950 for standard vehicles and $89,332 for fuel-efficient ones. If your lease includes a car above these values, LCT may be added to your lease costs.
Please note: This is very different to the Luxury Car Charge (LCC).