What happens to a novated lease if you lose your job?

09/07/2024 04:00 PM

Novated leasing is becoming an increasingly popular way for Australians to purchase a car, allowing them to finance the purchase of a vehicle via a combination of pre-tax and post-tax salary deductions.

“Almost any Australian can potentially get a novated lease – if you earn a salary on PAYG, you could be in!” Sean Tyniec, Head of novated leasing provider Oly, tells Drive.

RELATED: Is buying an electric car on a novated lease worth it?

According to Tyniec, there are currently around 350,000 novated leases in place around Australia.

Julian Wood, Head of Sales at Novated Lease Australia, concurs that the only real requirements are that “you’re a salaried employee and your employer is on board”.

“Ultimately it comes down to your employer approving it,” he says, “and they approve it just by agreeing to administer the novated lease deductions from the salary.”

So, what happens if your employment circumstances change – for better or worse? And what’s the answer to the dreaded – but important – question: What happens to my novated lease if I lose my job?

Here’s what you need to know.

What happens to my novated lease if I lose my job?

“If you're fired from your job, you de-novate your lease,” Wood explains.

“The employee would pay the running costs of the vehicle themselves and pay the finance payment each month directly to the financier, just like a regular car loan.”

It’s something worth considering before you sign on to any kind of finance product: can I continue to service the terms of this loan if my circumstances change?

What happens to my novated lease if I change jobs?

“It happens pretty commonly because people move about for their career,” says Wood of people changing jobs with a novated lease.

“Most leasing companies and employers will allow a re-novation, which just involves transferring your novated lease over to your new employer.

“More often than not they can re-novate as a lot of employers are open to offering it. But if they go somewhere where it's not offered at all, we will have a conversation to see if they can partner with them.”

If your new employer isn’t on board with the novated lease program, your lease will likely have to revert to being a regular car loan, where you pay your car’s running costs yourself and make payments directly to the financier.

What happens to my novated lease when I’m on maternity leave?

“If the maternity leave is unpaid, you would have to ‘de-novate’ the lease, meaning that you pay the finance directly to the financier (same as a car loan) and manage the running costs yourself,” Wood explains.

“If you’re on paid maternity leave, you can continue the novated lease for this period (provided the salary amount covers the repayment). 

“After maternity leave, if you return to your employer, you can put your lease back into a novation and take advantage of the benefits again.”

The post What happens to a novated lease if you lose your job? appeared first on Drive.