Do You Own A Car After A Novated Lease?
At the end of your novated lease, whether you walk away with ownership of your vehicle depends on the option you select. Let’s break down the choices and what they mean for you.
Options at Lease End
When your novated lease term comes to an end, you have several flexible options to decide what happens next with your vehicle.
1. Pay the Residual Amount to Own the Car
The residual (also called balloon) payment is a pre-agreed lump sum reflecting the car’s estimated value at lease end. If you choose to pay this amount, the car becomes your property with no further lease obligations. However, keep in mind:
You become fully responsible for all running costs (insurance, fuel, servicing) paid with post-tax dollars.
This can be a big upfront payment, so plan your finances accordingly.
2. Refinance the Residual Value
If you can’t pay the residual outright, refinancing is an option. This means taking out a new loan or lease to cover the residual payment, allowing you to keep the car without the large lump sum. Refinancing can:
Spread the cost over new monthly payments.
Provide flexibility if you want to keep the vehicle longer, but avoid upfront costs.
3. Trade-In or Upgrade to a New Vehicle
If you want a new car, you can trade in your current vehicle. The trade-in value will go towards the residual payment:
If the trade-in value exceeds the residual, you keep the difference, tax-free!
If the trade-in value is less, you’ll need to pay the shortfall.
Upgrading lets you start a new novated lease with a fresh vehicle and possibly better terms or features.
4. Extend Your Lease
If you’re happy with your current car but want to delay paying the residual or upgrading, ask your lease provider about extending your lease. This can:
Reduce monthly payments temporarily.
Give you more time to prepare for ownership or trade-in.
Understanding Residual Value
Residual value is calculated based on your lease term, expected depreciation, and ATO guidelines. It usually ranges between 30% to 60% of the car’s original value, depending on how long you lease and the vehicle type.
| Lease Term (Years) | Typical Residual Value (% of purchase price) |
|---|---|
| 1 Year | 70% - 75% |
| 2 Years | 55% - 65% |
| 3 Years | 40% - 50% |
| 4 Years | 30% - 40% |
This table helps you estimate your expected balloon payment and plan finances accordingly.
Steps to Buy Your Car After Lease End
Review Lease Agreement: Check your residual value and terms for buyout options.
Contact Lease Provider: Inform them of your intention to buy the vehicle.
Arrange Payment: Pay the residual amount upfront or discuss refinancing options.
Transfer Ownership: The lease provider will transfer the title to your name.
Arrange Insurance & Registration: Update policies and vehicle registration in your name.
Maintain the Vehicle: Now that you own it, all maintenance and running costs are your responsibility.
Conclusion
You can own your car after a novated lease by paying the residual amount or refinancing it, but you also have flexible options like upgrading or extending the lease. Understanding these choices and planning ahead helps you make the best decision for your budget and lifestyle.
If you’re thinking about a novated lease or have questions about post-lease options, contact us today. Our experts will guide you through every step.
FAQs
-
No. Ownership depends on whether you pay the residual amount or refinance. Without paying the residual, the car isn’t yours.
-
It’s the estimated value of the vehicle at lease end that you must pay to own the car outright.
-
Yes. Refinancing spreads out the residual cost into new payments, allowing you to keep the car without a large lump sum.
-
Your trade-in value is applied toward the residual. If it’s higher, you keep the difference tax-free. If lower, you pay the shortfall.
-
Many providers allow lease extensions, which can lower payments and delay ownership decisions.