GST saving on the vehicle (up to $6,191)
Your lease payments are made pre-tax
Bundle your car running costs for extra savings
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Shopping around for the right novated lease can save you thousands of dollars in interest and fees.
In our used car novated lease guide:
Yes, you can use a novated lease to finance a used car. Just like you would if you were buying a new car.
The advantages and disadvantages are mostly the same. So is the process for getting your lease established.
In fact, taking out a novated lease on a used car is quite a common option in my experience.
Some people just don’t like the idea of buying a brand new car. Or they have a tighter budget and a used car makes sense. Long wait times for new cars are also a factor for a lot of people.
But there are a few
key points you should think about before you decide if novating a used car is going to be worth it.
With a used car novated lease, you need to think about how old the vehicle will be at the end of the lease term.
The maximum end-of-lease age is generally 15 years (with some providers the max age is 12).
Most novated lease terms are 5 years, although they can be shorter.
So the maximum current age of the car you’re buying will generally be
The main difference with a novated lease on a private sale is the GST (goods and services tax).
Private sellers generally don’t need to charge GST, so you won’t make a saving on the sale price like you would if you were buying a used car from a dealer through a novated lease.
Of course there won't be a GST saving either way if you opt for a used car loan over novated leasing.
The maximum GST saving is $6,191 depending on the vehicle's price (for the FY2023/24 financial year), so this can make a big difference.
Let’s look at an example.
You see two identical models for sale. One from a dealer and one from a private seller.
The private sale might look cheaper on the face of it, but it’s worth factoring in the GST saving on the dealer price.
You'll still get GST savings on ongoing car running costs with a fully-maintained novated lease whether you buy the used car privately or through a dealer.
Novated lease GST discount
Cost to you
Buying a used car generally means higher maintenance and repair costs.
After all, the car may no longer be covered by a warranty and capped-price servicing.
To reduce risk on a used car novated lease, it’s usually a requirement to have the vehicle checked by an independent mechanic before you can enter into the agreement.
You’ll generally also make contributions from your salary to cover ongoing servicing and repairs.
The novated lease provider will help you estimate a suitable budget for these based on the age and condition of the car.
But if the repair costs exceed the lease budget, it will be your responsibility to cover these.
You can cover extra repair costs either by:
Either way, it’s in your interest to buy a used car that’s in good condition and unlikely to need extensive repairs during the lease.
Here are the main benefits of a novated lease versus a car loan as a way of financing a used car:
And here are some of the possible drawbacks of a novated lease for a used car:
Source: Datium Insights, February 2023
Shopping around for the right loan can save you thousands of dollars in interest and fees.
Novated lease guides and resources
Find out more about the possible savings, benefits and things to watch out for, plus your range of options with a novated lease in Australia.