What is the Best Length of a Novated Lease?
The best length of a novated lease depends on your personal circumstances, budget, and vehicle preferences. Whether you choose a short-term or long-term lease, there are pros and cons to each option.
Short-Term Novated Leases (12-24 months)
Advantages:
Flexibility: If you enjoy upgrading to new car models with the latest features and technology, a short-term lease is ideal. It allows you to change vehicles frequently, which keeps you driving the newest models on the market.
Less Commitment: A shorter lease requires a reduced long-term financial commitment, giving you the freedom to reconsider your options sooner rather than later.
Disadvantages:
Higher Monthly Payments: Since the lease cost is spread over a shorter period, the monthly payments will be higher compared to a longer lease.
Frequent Paperwork: Renewing leases more often means more administrative work, which can be a hassle.
Depreciation Impact: Short-term leases tend to feel the effects of initial vehicle depreciation more acutely, meaning the higher cost of ownership may become noticeable early on.
Long-Term Novated Leases (36-60 months)
Advantages:
Lower Monthly Payments: The lease cost is spread over a longer period, which results in more manageable monthly payments.
Financial Stability: Long-term leases offer more predictable financial planning, as you know what to expect in terms of lease payments for a longer duration.
Depreciation Management: Depreciation costs are better spread out over time, reducing their financial impact.
Disadvantages:
Less Flexibility: A long-term lease means you’ll have to stick with the same vehicle for a longer period, which could be frustrating if you like upgrading to newer models frequently.
Outdated Technology: As cars continue to advance, a vehicle leased for 4-5 years may begin to feel outdated, especially regarding safety and tech features.
Higher Overall Commitment: Committing to a longer lease term means you’re locked in for an extended period, which can be limiting if your financial situation or vehicle preferences change.
Choosing the best-novated lease length depends on what matters most to you. If you value flexibility and don’t mind higher payments, a short-term lease may be your best bet. If affordability and long-term financial predictability are key, then a longer lease will likely suit you better. It's essential to assess your budget, vehicle needs, and lifestyle before deciding.
Need help determining the best-novated lease term for you? Get in touch with our experts today to explore your options!