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Car Leases

Compare car leasing solutions and find out the best option for you through Savvy.

Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
Our authors
, updated on May 22nd, 2024       

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Businessman driving his car

If you’re a business or employee looking for a vehicle, a car lease can offer a flexible and cost-effective way to access one. This type of finance allows you to use a vehicle or equipment for a set period of time without having to purchase it.  

If you are looking for a car lease, you can compare a range of car lease offerings from a number of commercial lenders. Our experienced consultants can help secure the best rates and terms for your circumstances and get you approved in no time. Get started with a quote from Savvy today.

What is a car lease?

A car lease is a finance product that allows businesses and individuals to use a car without owning it. Instead, the financier buys the vehicle and then leases it to you for a set term. There are three main types of car leases in Australia:

Operating lease

An operating lease is essentially a long-term rental agreement taken out by a business for assets such as vehicles or equipment. At the end of the term, the business returns the asset – unlike other lease types, there is not option to buy. This type of lease is a suitable option when temporary access is needed and ownership isn't the primary goal.

Finance lease

A finance lease, also known as a capital lease, is a type of lease agreement where the business leases the asset from the financier over an agreed term with an eye to purchasing it. At the end of the lease, the business pays a balloon or residual payment to secure the asset. These leases are typically cheaper than operating leases as payments only include lease costs not maintenance and running costs.

Novated lease

A novated lease is a car financing option for employees that allows them to salary package a car through their employer. Lease payments are deducted from the employee’s pre-tax salary, potentially lowering their overall tax bill. The leased car is the employee’s to use for personal and work purposes during the lease term, and at the end there is the option to pay the residual and own the car outright.

Here’s how the different options compare:

Operating lease Finance lease Novated lease
Ownership
Lessor retains ownership throughout lease term
Lessor retains ownership until end of term
Lessor owns vehicle, employer facilitates lease, employee has possession
Option to buy
No option to buy at end of lease term
Option to buy at end of lease term
Option to buy at end of lease term
Term length
1–5 years
1–5 years
1–5 years
Maintenance
Typically included in lease agreement
Lessee responsible for maintenance costs
Responsibility varies, often included in lease agreement
Payment
Fixed payments covering lease period
Fixed payments covering lease period
Payments deducted from pre-tax income
Mileage limits
Yes, many leases set a maximum number of kilometres per year
Yes, many leases set a maximum number of kilometres per year
No
Balloon payment (residual value)
No
Yes, if lessee chooses to buy car
Yes, if employee chooses to buy car

What is a fully maintained car lease?

A fully maintained car lease can offer a convenient, low-admin way to get use of a vehicle without the hassle of arranging maintenance, insurance and registration. Much like shorter-term car hire, certain running costs like are all taken care of within your regular fixed payments. This option may be available to you on operating leases and novated leases, but not finance leases, which require you to organise and pay all maintenance and other on-road costs yourself.

Here’s how a fully maintained car lease compares to non-maintained car lease:

Fully maintained car lease Non-maintained car lease
Maintenance included in monthly payment and arranged by the lessor
Arrange your own servicing on your own schedule, around recommended intervals
Costs are tax deductible
Costs are tax deductible
Rego included in monthly payments
Register the vehicle yourself
Insurance included in monthly payments
Source your own insurance
Breakdown assistance included
Opt for breakdown cover or choose to pay as you go

Companies with larger fleets often choose fully maintained leases because it reduces the amount of administration work. However, while fully maintained vehicle leasing is easier to budget for, it is typically more expensive and removes some of the freedom from sourcing servicing and insurance.

Can I claim tax deductions on a car lease?

When you're deciding whether to lease or buy a vehicle, it's essential to consider the tax implications. In Australia, you can claim tax deductions for car expenses if you lease the vehicle under an operating lease agreement and use the car for work purposes. Expenses that can be claimed include repairs and servicing, fuel, insurance premiums, registration and depreciation. You may also be eligible to claim goods and services tax (GST) credits if you are registered for GST.

If you have taken out a finance lease and are registered for GST, you can claim back some or all of the GST included in your lease payments as an input credit on your next Business Activity Statement (BAS). This means you can effectively reduce your GST liabilities, saving you more money. Other tax deductions may be available, depending on your circumstances.

If you get your car under a novated lease or as part of a salary packaging agreements, you cannot claim tax deductions for running costs. However, you can typically claim for additional expenses associated with using the car for work, such as parking. Furthermore, under a novated lease, the running costs of your vehicle are deducted from your pre-tax salary, allowing you to save on your income tax.

How much does it cost to lease a car?

Much like a car loan, how much you pay to lease a car varies and is dependent on a number of factors, including:

  • Car price: generally, the higher the price of the car, the higher your monthly lease payments will be. However, remember that you're not financing the entire cost of the car when you lease; instead, you're paying for the depreciation of the vehicle over the lease term.
  • Lease term: shorter lease terms often result in higher monthly payments, but you will generally pay more with a longer lease term even if your monthly costs are lower due to accumulated interest.
  • Interest rate: higher interest rates on a car lease translate directly to higher monthly payments and higher loan costs overall.
  • Residual value: this is the estimated value of the car at the end of the lease term. A higher residual value translates to lower lease payments because the lessor (financing company) anticipates recouping more of the car's value when you return it.
  • Type of lease: the type of lease you have and whether it is fully maintained or not can affect how much you pay – for example, operating leases tend to be cheaper than finance leases as the leasing company takes on the depreciation risk.

Whether you are looking for a car lease for business or personal use, it’s important to understand the costs involved and budget appropriately. With Savvy’s car lease calculator you can estimate how much you will pay each month and over the course of the loan.

What are some alternatives to car leases?

Whether you are a business owner or an employee, there are a number of ways to get a car for work. Other than car leases, you may want to consider:

  • Chattel mortgage: a chattel mortgage is a type of secured loan for the purchase of assets such as cars primarily for business use. Under this arrangement, the asset is used as security for the loan and the borrower makes regular payments over time. Unlike a lease agreement, you own the asset from the start, giving you greater control over how the car or equipment is used or modified.
  • Hire purchase agreement: a hire purchase agreement is a type of financing arrangement where an asset is hired for a fixed period, typically with the option to purchase the asset at the end. During the hire period, the borrower makes regular payments to the lender, which typically include interest and a portion of the principal amount. Once all payments are made, ownership of the asset is transferred to the borrower.
  • Secured car loan: a secured car loan is a popular way to finance a car purchase. In this arrangement, the borrower borrows money to buy a car and the vehicle is used as collateral. If the borrower fails to repay the loan according to the agreed terms, the lender has the right to repossess the car to recover their losses. Because the loan is secured by the vehicle, lenders typically offer lower interest rates than unsecured loans.
  • Low doc car loan: a low doc vehicle loan offers a solution for individuals and businesses that lack the necessary paperwork to buy a car or equipment. It is suitable for applicants such as self-employed individuals and sole traders who can’t provide their last two years’ worth of completed tax returns. This type of lease can also work well if you’re upscaling and need to invest in vehicles or equipment to grow your business.

Why choose Savvy for your car lease

How to get a car lease with Savvy

More frequently asked car lease questions

What type of car can I get with a car lease?

Vehicle leasing is a way of gaining use of any car or vehicle you choose. It’s an option for finance that can be applied to any vehicle out there, no matter what the value or type. Larger luxury cars, trucks, SUVs, sedans and hatchbacks are all available with a lease. You can choose the specification of the vehicle before you order it, selecting options and features in the same way as you would if you were buying a car.

How long do I have to keep a vehicle for when I sign a lease agreement?

Car leases typically run for periods between one and five years, and sometimes even longer. Different lenders offer various terms, so it’s important to check the provider you’re considering caters for your specific needs.

What are the monthly costs of leasing a car?

One of the many reasons so many Aussies opt to lease a car is that repayment terms are so flexible. You can choose the length of the agreement to match your budget, and adjust payment amounts further by including a lower or higher residual payment. Using a deposit is also a great way of reducing the amount you regularly pay. Tax benefits often outweigh a lot of the cost of leasing a vehicle too.

What does 'residual value' mean?

A residual value or payment is due at the end of a car lease or loan. You can reduce your monthly repayments by using one.

How many kilometres can I drive a leased car?

Different car leases offer various allowances for kilometre usage. For example, with a fully-maintained car lease, part of the cost of your deal is defined by how many kilometres you’ll travel. That’s because it affects the resale value of the vehicle at the end of the agreement.

Will registration costs be included in my car lease payments?

That depends on what type of lease you take out. Fully-maintained car leases include servicing, registration and insurance. Some car leases, however, require you to be responsible for maintenance, rego and keeping the vehicle insured – usually with a fully-comprehensive policy.

What is gap insurance and do I need it?

Guaranteed Asset Protection or gap insurance provides peace of mind if you’re leasing a vehicle or you’re buying a car, van, or a truck using a different form of finance. Gap insurance is a way of protecting you or your business from financial loss if you have an accident and the vehicle gets written off. When that happens, there’s usually a ‘gap’ between the amount you still owe and the listed price of the car. Gap insurance covers that amount.

What happens with a residual at the end of my car lease term?

If at the end of the lease you would like to keep the car, you will need to pay out the residual amount. If you don't want to keep the car, you can start a new lease by paying out the residual via a trade in. 

How is GST treated if I am not the owner of the car?

With a car lease, the lender owns the car you drive, this structure allows the lender to claim back the GST within the purchase price of the car.  

This results in your monthly car lease payment being calculated on the purchase price of the car excluding GST which delivers a cheaper monthly repayment compared to other loan options. This is another large benefit of a car lease option. 

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