A novated lease isn’t just for brand-new cars. You can still enjoy the tax benefits and convenience of a novated lease without paying the premium price tag of a new vehicle.
That said, there are a few rules to be aware of. Not every used car will qualify, and some restrictions apply around the vehicle’s age and condition. Knowing these upfront will help you decide if a novated lease on a used car is the right move.
Can you get a novated lease on a second-hand car?
Yes, you can salary sacrifice a second-hand car, but there are some conditions. Most novated lease providers will let you package a used car as long as it meets certain criteria, like being under a set age, is in good condition and has a payload under one tonne.
The process is pretty much the same as leasing a new car, with similar pros and cons. Many Australians go the used-car route to avoid long wait times for new vehicles or to stick to a tighter budget.
How does a used car novated lease work?
A used car novated lease works much like a new car lease. Your employer makes the lease payments from your pre-tax salary, covering the car’s running costs, while you get the tax benefits of salary packaging.
The main difference is in sourcing the car – you’ll need to find a second-hand vehicle and have it approved by us, the lease provider. Once that’s sorted, the lease is structured the same way, including the residual (balloon) payment at the end.
Is there an age limit on used cars under a novated lease?
Yes, there is a set age limit on second-hand cars, which is no more than 12 years old at the end of your novated lease. This means if you choose a lease term of five years, the used car at the start of your term can’t be older than seven years.
Age limits exist to keep the lease practical, reliable and compliant with ATO guidelines. Older cars are generally harder to insure, more expensive to maintain, and may not hold their value in line with the balloon payment.
Dealer vs private seller: Which is better for a used car novated lease?
When it comes to a used car for a novated lease, buying from a dealer is usually the easier route. Dealers can provide a clear roadworthy history and warranty options, which makes it much simpler for us as the lease provider to approve your application.
Buying from a private seller can work too, but it often means extra checks and paperwork to meet the lease and ATO requirements. If you go down this road, make sure the car’s condition and ownership history are well documented before proceeding.
Both options can qualify for a novated lease, but keep in mind that a GST discount won’t apply to the purchase price on a privately sold used car. Even if you buy a used car privately, you can still enjoy GST savings on things like fuel, servicing and maintenance when your novated lease is fully maintained.
What this means (example)…
Are there incentives on used electric cars under a novated lease?
On top of the usual tax savings and convenience of salary sacrificing a used car, there are extra incentives for electric vehicles.
Thanks to the EV FBT Exemption, your tax savings are turbocharged as you won’t pay Fringe Benefits Tax so long as the car is under the luxury car tax threshold ($91,387 for 2025-26) and is an eligible EV model.
