What Happens To My Novated Lease If I Lose My Job?

If you lose your job while you have a novated lease, several things can happen, and you’ll have a few options to manage the situation.

Immediate Implications

One of the first effects is the suspension of salary packaging. This means that your novated lease payments will no longer be deducted from your pre-tax salary, which could increase your taxable income. Without these deductions, your take-home pay may decrease. Additionally, the novation agreement—where your employer takes on the lease obligations—will end, and you will now have a direct lease agreement with the leasing company. This means you’ll be responsible for managing the lease payments on your own.

Options Available

1. Continue Payments:
   You can continue to make the lease payments directly to the financier. If you secure new employment and your new employer offers novated leasing, you might be able to transfer the lease back to them. This option allows you to keep the vehicle and maintain the lease arrangement until you’re back on your feet.

2. Sell the Vehicle:
   If continuing payments aren’t viable, you can sell the car. The sale proceeds will go towards paying off the remaining lease balance and any residual value. This is a good option if the sale price covers the outstanding amount, but it’s worth checking the value of the car to avoid being out of pocket.

3. Early Termination:
   You may choose to terminate the lease early. However, early termination can be costly, as you’ll likely have to pay off the remaining lease payments, the residual value, and possibly early termination fees. The terms will be outlined in your lease agreement, so it’s essential to understand the financial impact before taking this step.

4. Insurance Claims:
   If you have Loan Termination Insurance (LTI), you might be eligible for benefits that could help with payments or even allow you to return the car if you lose your job. It’s worth checking your insurance policy to see if this applies to your situation.

Financial Considerations

Losing salary packaging benefits could increase your monthly expenses, so you may need to adjust your budget accordingly. If you’re considering early termination, be sure to factor in any penalties or fees, as they can add up quickly.

Navigating a novated lease after job loss requires careful consideration of your options and finances. It's a good idea to communicate with your leasing company to explore the best solutions for your situation.

Need help managing your novated lease after a job change? Get in touch with us today for personalised advice!