If your employer has a nominated salary packaging provider you’re required to use, you may still have the flexibility to find a great deal on your novated lease. This option is known as a self-managed novated lease.
With a self-managed arrangement, you can source competitive vehicle pricing and finance through an independent provider while your employer continues to manage the payroll deductions through their existing salary packaging partner.
At Novated Lease Australia, we’ll guide you through the process step-by-step, ensuring your arrangement remains fully compliant with your employer’s and salary packagers' policies, as well as the Australian Taxation Office (ATO) requirements, while helping you secure the best possible value on your lease.
What is a self-managed novated lease?
A self-managed novated lease is an arrangement where the employee arranges the finance for their novated lease separately from their employer's contracted salary packaging provider.
A self-managed novated lease gives you the same great benefits as a standard novated lease, but with more freedom and flexibility in finding your finance at the start of the process.
Rather than being limited to your employer’s nominated salary packaging provider, you can shop around for a great deal, vehicle pricing, and support that suits your needs. Once you’ve secured your preferred arrangement, your employer can still manage the payroll deductions through their existing provider, keeping everything compliant and seamless.
In contrast, when everything is arranged through your employer’s preferred partner, it’s known as a fully-maintained novated lease. While convenient, this can sometimes limit your choice of finance options and providers.
With a self-managed novated lease, you’re in control, choosing who you work with to source your finance, helping you compare the market for the most competitive rate. The right finance deal can make a big difference to your overall lease cost and how much you pay for your car over time.
How does a self-managed novated lease work?
With a self-managed novated lease (sometimes called a third-party finance lease), an employee sets up the finance for their lease separately from the company that provides salary sacrificing services to their employer.
Usually, this involves using a specialist novated lease provider to assist with the finance on the lease, potentially allowing the employee to secure better finance terms with lower costs. The novated lease provider can also help you source the vehicle and will provide you with estimates only on the running costs.
Once the lease documentation has been finalised, it is your role to instruct the salary packager to commence deductions for your novated lease. The salary packager will determine the final running costs when setting up the novated lease and will be responsible for the ongoing management and administration, which involves deducting the regular amount from your pay and remitting payments.
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The role of the Salary Packager vs NLA in a self-managed novated lease
| Role | Core Function (Salary Packager) | Core Function (Novated Lease Provider - NLA) |
|---|---|---|
Concept | The 3-way arrangement that allows an employee to use their pre-tax salary in exchange for benefits. | The specialised finance arrangement for the vehicle itself. |
Key Activity | Manages the ongoing payroll administration for the employer. This includes deducting the salary sacrifice amount, managing GST claims, FBT reporting, and remitting payments to the financier. | Arranges the finance (the lease) and sourcing of the vehicle only. NLA acts as the intermediary to secure the finance terms and pricing on the car. |
Client Relationship | Has the primary, ongoing administrative relationship with the employer. | Has the consultative relationship with the employee to set up the finance and car purchase. |
The role of Novated Lease Australia in a self-managed novated lease
Novated Lease Australia’s key responsibilities include:
- Securing Finance and Sourcing Cars: Calculating the novated lease finance costs, shopping around for lease finance among multiple specialist lenders, and helping the employee find a car by leveraging relationships with dealerships to negotiate the price.
- Initial Education: Explaining the benefits of a novated lease, helping a customer maximise their tax benefits, including advising on FBT exemptions (e.g. for electric vehicles) and advising the customers of estimates only on the running costs.
- Set-Up Support: Guiding the customer from the initial quote through to settlement of their lease, as well as providing the final signed novation and lease agreements to provide to their salary packager.
- Handling Novation & Lease Agreements: Preparing the novated lease documentation for the employee and the employer's salary packaging provider to arrange signing. In most cases, though, you will need to source the Salary Packager’s agreements or documents directly from them to complete them yourself.
Contact us about a self managed novated lease
Contact UsMore questions about self-managed novated leases
Can I do a self-managed novated lease?
It’s generally possible to do a self-managed novated lease, even if your employer has a salary packaging provider that you must use for the lease admin. It’s a good idea to double check with your employer whether it’s possible (usually through the HR department) and by confirming with their salary sacrificing provider.
Bear in mind that it’s generally in the interest of your employer’s preferred salary packaging provider that you don’t do a self-managed novated lease, and instead do everything through them. They may try to dissuade you from choosing the self-managed route.
But remember, there is usually no additional cost to you for doing a self-managed lease, with minimal extra admin. You could save a significant amount by shopping around with other providers.
Can I sort my own finance with a self-managed novated lease?
It’s also possible to take things completely into your own hands with a self-managed novated lease and source and apply for the lease finance yourself. This gives you full control over your lease costs and responsibility for setting things up correctly.
The downside is that doing this can be very time-consuming. If you are not experienced at setting up novated leases, it may also be a difficult process to navigate.
For example, you will need to simultaneously deal with the car dealer and the finance provider to coordinate the purchase, calculate your own running cost budget, and work out the pre- and post-tax contribution levels for your regular repayments to ensure there is no fringe benefits tax liability.
Using a specialist novated lease company means you get support with the complexity that a novated lease can present, while also getting the benefit of being able to access multiple finance options.
Can I get a novated lease without my employer?
Ultimately, you can only do a novated lease (including a self-managed one) if your employer agrees to facilitate it. Your employer will need to be part of the agreement and, once it’s established, deduct the lease payments from your salary and pay them to the lease company on your behalf.
Can you get a self-managed novated lease as a sole trader?
It’s only possible to do a self-managed novated lease if you’re an employee of a company and paid a salary. If you’re wondering whether you’re eligible, speak to our team and we’ll talk you through your options.
Written by
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CEO
Bevan Guest
Reviewed by
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Editor
Sean Callery
