16 May 2024

Novated Lease - What happens if I leave my job?

One of the most common concerns people have when considering a Novated Lease is what happens if they move jobs.

The answer depends a little on whether your new employer offers Novated Leasing or not, but in a nutshell, the good news is that Novated Leases are generally transferable.

The options available to you will depend on your situation, but broadly speaking, there are two main scenarios - employers that offer Novated Leasing and those that don't.

What happens if my new employer offers novated leasing?

In this case, transferring your Novated Lease should be relatively straightforward. There might be a form or two involved if you are moving to a different salary packaging provider, but creating a new Novation Agreement is typically pretty painless. There may also be a fee levied, but this depends on the provider.

What happens if my new employer does not offer Novated Leasing?

Option 1: Make payments directly

The lease with your current employer will be terminated and you can arrange to start making payments on your car directly to the financier and pay the running costs yourself. This approach is more aligned with a traditional car loan type of arrangement and in this case, you won't continue to save on tax. But for the time you've had your lease before changing employers, you'll have savings on GST and income tax.

Option 2: Pay whole lease early

Alternatively, you can pay out the whole lease early and essentially assume ownership of the vehicle. However, this can be quite costly. In the event of an early termination for a Novated Lease, the pay out is calculated as the remaining lease payments plus the residual value and possibly a termination fee, if your financier applies one.
Your Novated Leasing provider may also add their own additional termination fee on top of the financier's fee, however FleetPartners does not do this.

FAQs On Novated Leasing and leaving your job

Are there any risks involved with a Novated Lease?

Aside from worrying about what happens when you move jobs (which hopefully we have just adequately addressed above!), one of the main risks people worry about is that the Residual Value ends up being higher that what the car is actually worth at the end of the lease.
Fortunately, Residual Values (which are set by the ATO) are generally quite conservative, which means that if you decide to sell the vehicle at lease end, the sale price is likely to cover the residual value. Some customers even make a profit!

• The end of a Novated Lease term

Is a Novated Lease worth it if i plan to change jobs?

No-one has a crystal ball - so it might be difficult to predict whether you might end up moving jobs during the course of a Novated Lease. Ultimately, it depends on your personal circumstances, but in general, we find that the many benefits of Novated Leasing typically tend to outweigh the small risk of any future job uncertainty.
As noted, you will have three main options -

• transferring your Novated Lease if your new employer offers this;
• transitioning to paying the financier directly;
• or paying out the vehicle lease and assuming full ownership of the vehicle.

Does leaving my job affect my credit score due to a Novated Lease?

No.
Leaving your job and your credit score are not linked.
However, you will still need to pay the finance repayments. Just like other finance products (like a credit card, personal loan or mortgage) if you don't make the repayments and default on the loan, it will impact your credit score. Other than that, leaving your job will not impact your credit score.
When you take out a Novated Lease, a check on your credit history will occur to ensure you are going to be able to comfortably make the lease payments. 

How can i mitigate risks when leaving a job with a Novated Lease?

If you're really worried about the possibility of changing jobs in the middle of a Novated Lease, then it might be a good idea to keep some savings aside for a rainy day, just in case you end up having to change Novated provider and there's a fee involved... or you decide to purchase the vehicle outright (pay out the remaining lease payments, residual value and any fees).
It is definitely worth considering your job security and general job satisfaction prior to taking out a Novated Lease.
If you are happy in your role and have a sense that your position is secure, then obviously you are better placed to make a judgement call on taking out a Novated Lease than someone who is deeply unhappy with their job and/or uncertain about how their employer views them.

Final words on Novated Leases when changing employers

Does your new employer support vehicle salary packaging? If the answer is "yes", then the process should be pretty easy for you.
But even if they don't, just remember you can arrange to make payments directly to the financier, or pay out the entire lease (if you have the financial means to do this).
If you have further questions about Novated Leasing, please don't hesitate to contact FleetPartners.