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Guide to Novated Lease Residual Values

Written by

Shaun McGowan

Novated Lease Residual Values

A novated lease residual value, also known as a balloon payment or lump-sum payment, is the amount required by the Australian Tax Office (ATO) at the end of a novated lease term.

What's the main benefit? The benefit of a residual are pretty simple. By including a residual, your monthly payments are considerably lower than other types of car finance at the expense of a final, larger payment.

You can find the residual amount of your novated lease by multiplying the cost of the vehicle by the applicable percentage according to your lease term.

You can see in the table below how the residual value will be calculated according to the length of your novated leasing contract:

ATO set Residual Value Percentages

The ATO set guideline on residual values are based on a percentage of the vehicle driveaway price (the amount your purchase the car for) over the lease term.

As per this table below, it represents the ATO minimum values, however a tolerance of 5-10% allowed. For instance, if you are adding a lot of mileage to the car, you may want a lower residual. This is best discussed when taking out your novated lease.

Lease LengthResidual Value Percentages

12 Month Lease


24 Month Lease


36 Month Lease


48 Month Lease


60 Month Lease


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If you sell your car for a higher amount than your residual payment, the profit is yours to keep, tax free.

Your options to pay out your residual

At the end of your novated lease, you’ll be given a few options - either refinance the vehicle over an additional term, or payout the remaining balance on your car.

This remaining balance is your residual amount, and understand how it is calculated and how it works can save you money and even profit.

See, when you set your residual payment correctly, you'll most likely be able to sell your car for a higher amount than your residual payment is. In this instance, any difference is yours to keep, tax free!

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About the Author

Shaun McGowan from



Shaun McGowan

Shaun is determined to help people pay as little as possible for financial products, through education and world class technology. Before Money he co-founded Fleet Choice, a novated lease company that Eclipx (ASX:ECX) acquired.