Novated Leasing a Used Car
Found some used wheels you’ve got your heart set on?
With novated leasing on a used car, you can drive the vehicle you want while benefiting from lower costs, tax perks, and quicker access.
All with fewer strings attached.
Why Choose to Novate a Used Car?
Full Tax Perks.
Less Depreciation.
Salary packaging a used car is one of the smartest ways you can maximise your savings, although it also works for New Cars, and can even work on your current car.
From avoiding steep depreciation to enjoying significant tax perks, here’s why it could be the right option for you:
Avoid the Biggest Depreciation Hit
Novated leasing a used car, even a dealership used car, is one of the smartest ways to get the maximum value, and skip that major loss.
Full Tax Perks, without Upfront Cost
You make pre-set payments for a fixed term from your pre-tax income, giving you the exact same savings to take-home pay you would get with novating a new car.
Even Lower Finance
Costs
Novating a car already lets your car pay you back, but with a used car, you can take your take-home pay even further.
Full Variety and Faster Access
Whether it's a hard-to-find deal on carsales, or a steal of a price on a dealership used car, novating a used car lets you get all the benefits, with even more flexibility and speed.
How a Novated Lease Works:
Novated Leasing is a form of salary packaging, where your employer agrees to turn part of your pay in to a benefit, like a car.
Instead of paying (traditionally) for your car costs using after-tax wages, your employers pays for all of this with your pre-tax dollars, boosting your take-home pay without changing your salary.
Without a Novated Lease:
With Clear Lease:
how it works: novated leasing a Used Car
Three Steps to Savings
1. Source your Car.
The key condition is that unless the car is a rare/prestige model (or another car that will retain value regardless of age), the used car should not be more than 12 years old when the lease term ends.
As most leases are 3-5 years, we may not approve used cars that are more than 7-9 years old.
2. Get a Quote.
Once you've left us your details, our team members will reach out to make sure the car is fit for a novated lease, meeting all criteria.
If all looks good, the team will find the best finance rate for you, check that your employer allows salary packaging, and prepare a lease proposal for you.
3. Sign the Lease.
Fringe Benefits Tax in a Nutshell: How it Impacts New Car Novated Leasing
Why EV's are the most common choice for used Car Novated Leases
FBT is a special tax applied to employee 'fringe benefits'. Fringe benefits are any forms of compensation, like health insurance, or novated leasing, that aren't directly salary/wages.
Fringe benefits tax is reduced when the employee has to pay post-tax to access their benefit, so with Novated leases, roughly 50% of the cost is paid pre-tax, and 50% is paid post-tax, to avoid FBT.
However, EV's are completely exempt from FBT, and if you novate a new EV, you can pay for all of the finance and ongoing costs with pre-tax money. This gives them a much stronger discount.
An FBT Example:
EV's vs ICE Cars & Savings
However, the Polestar 2 would actually cost a little less than the Mazda CX-5 on a Novated Lease, because it can be paid entirely with pre-tax dollars.
Meaning you can get alot more car, or alot lower cost by choosing an EV with a novated lease.
Polestar 2
Salary: $120,000. Which means you would normally pay $562 in tax per week.
Tax Savings: As an EV, 100% of Finance and running costs ($368) are deducted from your pre-tax salary, this lowers your weekly tax by $107, and GST by $33.
Mazda CX-5 Sport
Salary: $120,000. Which means you would normally pay $562 in tax per week.
Tax Savings: As it is not an EV, only 50% of the total finance and running costs ($287) are deducted from pre-tax salary, and 50% are taken post-tax. This lowers your weekly tax by $46, and GST by $13.
Frequently Asked Questions:
While most used cars will be easy to put on a novated lease, they do (generally) need to be no more than 12 years old at the end of the lease.
The exception is vehicles that are so prestigious, classic, or collectible that their value at an old age would not drop significantly.
This is because older cars can have very unpredictable maintenance costs, reliability issues, and it's very difficult to be sure that the residual value on them will actually match the market value at the end, so lending and ATO compliance becomes complicated.
The 12 year rule is in place to protect all parties from financial and compliance risks. If you have an older car you're interested in, and need a second opinion on whether it could be considered for a lease, reach out to us.
No, as with a novated lease on a new car, you can pay for the used vehicle and running costs using pre-tax income. Your taxable income is reduced, and your take-home pay is increased, in exactly the same way.
Really, the only benefit missing for used cars, is that because they are used, Clear Lease is unable to use its buying power to negotiate for special fleet discounts, like we can on new cars from major brands. You'll need to weigh up your savings on a used car, vs our discounts on new cars and decide what works best for you.
As with any novated lease, you will have three options when your lease comes to an end:
- You want to buy and keep the car, and you want to pay the lump sum residual fee to do so (you'll know what this fee is before you sign to begin the lease). You pay the fee, and have no more lease payments - just regular ownership of the car.
- You want to buy and keep the car, but don't want to pay the full residual sum all at once, so you refinance the residual under a new novated lease, keeping the tax benefits while paying to own the car.
- You don't want to keep the car, so you sell it and use sale price to pay the residual fee. From here you can choose to start a novated lease on a new vehicle if you wish.
Clear Lease can have you fully settled and financed within a day or two from contact. The main barrier is ensuring that we already work with, or can contact your employer to ensure they are onboard with salary packaging.
In many cases, it can be much faster than waiting for a new car that is not in stock.
Novated leasing with us includes maintenance and repairs as part of the price by default, unless you request otherwise.
We'll dive into Manufacturer guidelines for repairs expected at certain intervals depending on the model, age, and condition of the car you're looking at, and pre-plan for these repairs coming up, as part of the fixed cost you'll pay per pay cycle. This helps you to not worry about unexpected costs.
Yes, the ATO has stated that as long as the following conditions are met, it is exempt from FBT:
- EV was held and used by the first owner on or after 1 July 2022
- Luxury car tax (LCT) has never been payable on the importation or sale of the car. That means it cannot have been sold for more than $79,659 in FY21-22, $84,916 in FY22-23, $89,332 in FY23-24 or $91,387 in FY24-25.
For many people, yes. If you're salaried, want to put your tax to better use, and would otherwise have a car, novated leasing can save you money. There’s no upfront deposit, meaning that cash can be used elsewhere or invested - no GST on the purchase, and you benefit from tax savings on repayments and running costs. Plus, budgeting is simpler with one all-inclusive, pre-tax payment.
That being said, novated leasing isn’t a great reason to buy a more expensive car than you need. It’s a smarter way to pay for a car you were already planning to get, or get a nicer car for the same price - not a green light to splurge on something you can't really afford.
If you change jobs, your lease can be transferred to your new employer, or you can choose to take over the payments yourself. Our team will help you manage the transition so you stay covered.