Why commit to buying a car when novated leases and car subscriptions offer flexible, hassle-free alternatives? Both options allow you to drive the vehicle of your choice without the long-term commitment or large upfront cost of a purchase. But how do you decide which one suits you best?

In this article, we break down the key differences between novated leases and car subscriptions, helping you make an informed choice based on your needs and lifestyle.

Firstly, What Does Novated Mean?

When it comes to car leases or subscriptions, Novated refers to a “salary sacrifice” arrangement you can enter into with your employer to finance your car payments. Your employer agrees to deduct a portion of your taxable income to make monthly or weekly payments on your behalf. 

Typically, the payments include car, maintenance, insurance, and other related costs bundled together, removing painstaking admin from the equation. Since they are deducted from your taxable income, they also allow you to save on taxes every year.

Got Your Heart Set on One Car? Consider a Novated Lease

If you’ve already decided on a specific car, a Novated Lease might be the perfect option. This choice is ideal for more commitment-focused drivers, as it involves long-term contracts, typically lasting a few years.

With a longer-term lease comes some upfront costs, such as a security deposit to the lessor. To manage these expenses, many customers use a financing institution. A Novated Lease is a great fit if you’re sure about the car you want. Plus, at the end of the lease, you’ll have the option to purchase the car by paying off the remaining balance.

Switch Cars as Easily as You Switch Outfits with a Novated Subscription

If you like the idea of driving different cars without long-term commitment, a Novated Subscription is perfect for you. With no hidden fees, large upfront costs, or minimum term requirements, all it takes is choosing a car and arranging payroll deductions through your HR. Then you're ready to hit the road.

The standout feature of a Novated Subscription is its unmatched flexibility. When you’re ready for a new vehicle, simply provide two weeks' notice, and you can swap your car for another—effortlessly.

This option is ideal for drivers who enjoy variety or want to explore electric vehicles (EVs) in a cost-effective, hassle-free way. Plus, with possible Fringe Benefits Tax (FBT) exemptions for low or zero-emission vehicles, a Novated Subscription lets you take advantage of these incentives without the financial commitment of purchasing an EV.