Novated leases are designed for employees who wish to lease a car as part of the remuneration package they have negotiated with their employer.
Prior to entering into the ‘Novation Agreement’, the lender enters into a ‘Lease Agreement’ under which the employee agrees to lease the car from the lender on the terms and conditions set out in that agreement.
The acceptance of this transaction must be met by the lenders normal lending criteria.
- Upon the signing of the novation agreement by the employer, the original lease agreement between the employee and the lender ends and two concurrent leases come into effect,
- One between the lender and the employer, and
- One between the lender and the employee.
From the date of the novation agreement under the first lease, some of the employee’s rights and obligations under the original lease such as the payment obligation are ‘novated’ to the employer.
Under the second lease the employee retains liability for the residual value.
Should the employee leave his or her current employment, the employer must send to the lender a notice of termination. Upon the employer giving this notice, the two concurrent leases are terminated and a third lease similar in terms to the original lease comes into effect between the lender and the employee. This type of arrangement is referred to as a full split novation.
The employee can then transfer the novated lease to the new employer by the signing of a new ‘Deed of Novation’ between all parties.
The employer has no capital costs, and as employees leave, the burden of the obligations and responsibilities of the unwanted car is also removed.
2 ways to Apply For Novated Leasing
The fastest way to get an answer for finance is to complete our easy application form online. You even have the ability to attach files from your computer.
The easy way to apply for finance is to request a call back. Leave some details and we’ll call you back to complete the loan application over the phone.