Novated Lease Used Car: How It Works | NLA | Novated Lease Australia

Yes, you can get a novated lease for a used car

It’s possible to pay for a used car through a novated lease with the same tax benefits that usually apply. In fact, how a novated lease works is much the same whether you’re getting a brand new car or a second-hand vehicle.

The only additional restriction on a used car novated lease relates to the age and condition of the vehicle. To be eligible, your car must not be over 12 years old at the end of your lease term and in good condition.

The used car can be sourced via a dealership or privately, as long as it meets the other novated lease eligibility criteria (i.e. must be a passenger vehicle with a payload of less than one tonne).

How does a used car novated lease work?

With a used car novated lease, you can pay for a second-hand vehicle of your choosing, plus running costs, directly through your salary via your employer, with an income tax saving.

Here’s what happens:

You find a used car for sale, either from a car dealer or private seller.
You apply for a novated lease through a provider like Novated Lease Australia, based on the car you have in mind.
If the vehicle is eligible and your application is approved, the lease finance provider purchases the vehicle on your behalf to lease it to you.
There’s a novated lease GST discount on the purchase price of the used car you’ll be driving (up to $6,334 in FY 2025/26) if it’s purchased from a dealership (most private sellers are not GST registered so there would be no GST payable anyway).
Lease payments are then automatically deducted from your salary by your employer each time you are paid. These salary sacrifice car payments include your car running costs (fuel/charging, insurance, registration/CTP, servicing and tyres).
Depending on the type of used car you novate, either all or part of your lease payments are made using your salary before tax is deducted. This lowers your taxable income and tax bill.
There’s also a GST discount on any running costs included in your pre-tax lease payments (no matter where the car was purchased from initially).

Benefits of novated leasing a second-hand car

The pros and cons of a novated lease are pretty much the same for a used car, but there are some additional benefits of leasing a used car in particular that are sometimes overlooked:

Flexibility over how to source your vehicle:

If you’re buying used, you have more buying options (dealer or private sale). If you find the right used vehicle, chances are you can still get a novated lease regardless of who you’re buying it from.

Offset higher maintenance costs:

A used car typically involves higher maintenance costs (i.e. generally no capped-price servicing, manufacturer warranty may have expired). Packaging these costs as part of your novated lease can be a big cost saver and a more convenient way of budgeting.

FBT exemption may still be available:

With more and more used EVs hitting the market, there are increasingly opportunities for drivers to avail themselves of the fringe benefits tax exemption on EV novated lease. To be eligible, the EV must have been first held and used after 1 July 2022 and be valued below the luxury car tax threshold for fuel efficient vehicles ($91,387 in FY 2025/26).

May be more cost effective overall:

There’s a reason a lot of people choose to buy a used car these days: it can be a lot cheaper than buying new and used cars tend to be better for longer as technology improves. If you combine that with the savings available through a novated lease, financing a used car this way can be a low-cost way to drive a high-quality car.

Used car novated lease: Dealer vs private sale

	Dealer	Private sale
Eligible for novated lease	Yes	Yes
GST discount applied to purchase price	Yes	No
GST discount on running costs	Yes	Yes

Used car novated lease cost example

Let’s imagine a hypothetical driver, Alan, looking for a second-hand ute. Alan finds a 2021 Ford Ranger at a nearby dealership that fits the bill. Here’s what his costs and savings would look like if he decides to pay for the ute through a novated lease.


Vehicle purchase price (2021 Ford Ranger XLT, double cab 4X4)	$51,500
GST saving on purchase price	-$4,545
Weekly novated lease payment	$290 (including running costs of $115/week)
Annual tax saving (income tax & GST)	$3,139
Tax saving over a 5-year lease term	$15,696
*Calculation is based on a driver in NSW with an annual gross salary of $100,000 driving 10,000km per year. Running costs include: fuel, comprehensive insurance, registration and CPT, servicing and tyres. Pricing is accurate as of March 2026. This is an example for illustrative purposes only based on the assumptions described. Your cost and savings may be different depending on your situation.

Will a used car novated lease work out cheaper?

The cost of a novated lease is largely based on the cost of the vehicle itself. If the used car you want to drive is cheaper than a brand new option, the cost of your lease will likely be proportionately cheaper too.

But there are exceptions to this rule:

As mentioned already, a used EV that was first in use before 1 July 2022 will not be eligible for the FBT exemption. If that's the case, a used EV could actually cost more under a novated lease (depending on its age) than a lease on a more expensive new vehicle that is eligible for the FBT exemption.
Novated lease interest rates may be higher on used cars compared to new vehicles in some cases. This could impact the overall calculation for whether a used or new vehicle will work out cheaper (this is also the case with most finance options – e.g. a car loan).
If the cost of maintaining the used car (e.g. servicing and replacement tyres) is higher than a similarly-priced new car, your regular novated lease payment could be slightly higher. But again, this would be down to the higher cost of maintaining a used car, which would be the case no matter what way you pay for it. A used car novated lease could actually bring down your maintenance costs considerably compared to other options due to the income tax and GST savings available.

Choosing the right used car for your novated lease

When considering a used car for your novated lease, it's essential to focus on vehicles that are reliable, even if they are a few years old. Consider cars with a comprehensive service history, low to moderate mileage, and a reputation for durability.

Your Novated Lease Australia consultant can advise on used car options to fit your budget and lifestyle needs.