How Can I Salary Sacrifice a Leased Vehicle?

Employees often make arrangements with their employers to lease cars using their pre-tax income. This sums up the concept of salary sacrificing a vehicle.

Making payments for a car lease before tax deductions can reduce the taxable amount. This means employees go home with more significant pay than would have been the case with a higher tax.

How Does Salary Sacrifice Car Lease Work?

Salary sacrificing is also commonly known as novated leasing and works with both new and old cars. It differs from the usual arrangement that involves you financing the lease from your income after tax deductions. This kind of lease allows you to pay from pre-tax earnings.

While novated leasing sounds similar to getting a company car allowance, both concepts differ.

With a car allowance, the company provides extra income for the car and expects you to use it for business. Getting a lease, in this case, becomes a personal affair, and the extra income is taxable. This is where they differ as salary sacrificing offers more flexibility.

You can use a salary sacrifice car for personal affairs or work. Although your employer is the financier, you are not under any obligation to use the car for business.

Self-sacrificing a lease car can benefit both employers and their employees.

Companies can avoid the financial risks that come with car allowances as the lease leaves with employees who resign. Employees too can easily access new cars without bothering about the administrative requirements.

You will find different kinds of offers from lenders when salary sacrificing to get. Most deals will save you money, so be intentional about choosing a cheap car leasing company that offers good interest rates.

What You Should Know Before Taking a Salary Sacrifice Car lease

Granted, salary sacrificing a car comes with many benefits. It’s worth considering if these advantages fit your particular context. Keep the following factors in mind before proceeding with the lease:

  • Salary sacrificing means less tax and insurance. Finance companies regulate the number of people benefiting from the offering by considering credit scores. You have a better chance of getting approval if your credit score is impressive.
  • You are responsible for the car expenses in a salary sacrifice scheme. Even if you leave your current employment and transfer the lease to the new workplace, the vehicle remains your liability.
  • With fully-maintained car leases, maintenance costs and repairs are part of the finance payment. You pay part or all of the associated costs pre-tax. On the downside, this can add up and affect your fringe benefits tax.

Do You Need Your Employer’s Consent to Salary Sacrifice a Leased Vehicle?

Involving your employer when taking a salary sacrifice lease is compulsory since they will be responsible for approving the lease.

The entire agreement is between you, your employer, and the lease provider, so you need your employer’s consent.

However, you can continue with an ongoing lease even if you change workplaces. You simply have to get the approval of your new employer. Once they agree to be part of the scheme, the former employer transfers the lease to the new company.

Some employers attach penalties that prevent employees from leaving before the contract expires.

How Long Does It Take to Arrange a Salary Sacrifice Car Lease?

So long as you use a reliable car lease company, finalising a salary sacrifice lease comes easy.

The best part is that your role in the administrative procedures is minimal. Your employer works with the salary packaging company to make necessary deductions and hand it over to the lease company.

Comparing prices, providing your salary information, and deciding on the leasing terms with the provider are necessary steps to expect. You can speed up the process by using a car salary sacrifice calculator. It’s also helpful to decide on the car model beforehand.

Regarding how long the lease will run for, some take up to five years. Short-term leases can last for a year or less. It all depends on the type of vehicle and agreement terms.


Salary sacrificing a leased vehicle can save you money while you enjoy riding in your dream car.

From buying a car to starting a new lease, what you do when the car lease ends is up to you. Discuss your options with your financing firm at the end of the lease and choose a suitable arrangement.