If you’re in the market for a new, used or electric vehicle and exploring car leasing in Melbourne, you’re likely weighing up your lease options. Two popular types are the operating lease on a car and the novated lease in Australia. While both options offer flexibility and potential tax advantages, they suit different lifestyles, employment situations, and business needs. So, which lease is best for you, or your fleet? Let’s break it down.
What Is a Novated Lease?
A novated lease in Australia is a three-way agreement between you, your employer, and a leasing company. Under this arrangement, your employer makes the lease payments directly from your pre-tax salary. This setup is known as salary packaging, and it can reduce your taxable income while giving you access to a car for personal or business use.
Key Benefits:
- Potential tax savings via salary packaging
- Can be used for new, used or electric vehicles
- Flexibility to choose your own car
- Running costs (like fuel, insurance, and servicing) can be bundled into the agreement
Things to Consider:
- You need to be employed with an employer that offers salary packaging
- If you leave your job, the lease becomes your responsibility
- May include balloon payments or residual values at the end of the term
What Is an Operating Lease?
An operating lease on a car is typically used by businesses looking to lease vehicles for their team or fleet. In this model, the vehicle is leased for a set term and returned at the end — no need to buy it out, and no responsibility for residual value.
Key Benefits:
- No obligation to purchase the car at the end
- Often includes full maintenance, registration and servicing
- Predictable monthly payments and easier budgeting
- Excellent for fleet solutions or short-to-medium-term business needs
Things to Consider:
- Usually only available to businesses or ABN holders
- You don’t own the asset, which can be a pro or con depending on your goals
- May have usage restrictions (like kilometre limits)
Comparing the Two: Which Lease Suits You Best?
The biggest difference between a novated and operating lease in Australia comes down to who the lease is for and how the vehicle will be used. The company you choose for your car leasing in Melbourne can also have an impact on the specific terms of each lease.
| Feature | Novated Lease | Operating Lease |
| Ideal For | Employees | Businesses/ABN holders |
| Ownership | Personal use | Business/fleet use |
| End of Lease | Option to buy | Return the vehicle |
| Tax Treatment | Pre-tax salary deductions | Lease payments may be tax-deductible |
| Running Costs | Can be bundled | Often included |
| Vehicle Type | New, used or electric | New, used or electric |
If you’re an employee looking to save on tax while driving a reliable vehicle, a novated lease could be your perfect match. If you’re a business or freelancer needing access to vehicles without the hassle of ownership, an operating lease might tick more boxes.
Can You Use These Leases for Electric or Used Cars?
Absolutely. Both lease types can apply to new, used and electric vehicles, giving drivers and businesses more choice and flexibility. Whether you’re eyeing a zippy EV to cut down fuel costs or a dependable used SUV for weekend road trips, there’s a lease option to match your needs.
Fleet Solutions and Flexibility
Businesses in need of multiple vehicles for staff often lean towards fleet solutions through operating leases. This allows streamlined vehicle management, predictable costs, and easier upgrades — without tying up capital in depreciating assets. However, some businesses also offer novated leases as an employee benefit, giving staff more value while keeping the books lean.
Flexible Car Leasing: Finding the Right Fit for Your Next Journey
Choosing between an operating lease on a car and a novated lease in Australia comes down to your employment status, financial goals, and how you plan to use the vehicle. For employees wanting personal-use vehicles with tax perks, novated leases offer flexibility and convenience. For businesses and sole traders, operating leases offer a hassle-free way to manage cars without ownership obligations. Whatever your situation, understanding the difference helps you make a smarter decision when it comes to car leasing in Melbourne.
