Novated Lease vs Our Work Use Car Loan

A Novated Lease vs Our Work Use Car Loan

An Honest Cost Comparison for 2026

If you're a PAYG employee with a car allowance, you’ve probably been pushed towards a novated lease. They sound great—"pay for your car with pre-tax dollars!"—but are they really the best deal?

The short answer is: not always.

A novated lease is a three-way agreement between you, your employer, and a finance company. While convenient, this convenience comes at a significant, and often hidden, cost. Let's break down the real costs of a novated lease versus a transparent alternative like our Work Use Car Loan.

The Problem with Novated Lease "Savings"

Novated lease providers (like Maxxia, SG Fleet, or Smartleasing) make their money by "bundling" all your costs. This is where they hide their margins:

Inflated Interest Rates: They almost never disclose the true interest rate. It's often significantly higher than a competitive market rate.
High Admin Fees: You'll pay an "admin fee" every single month, often adding up to over $800 per year, just for them to manage your money.
"Forced" Insurance: You are usually required to use their preferred insurer, which can be 20-40% more expensive than getting your own quotes.
Inflated Servicing: You're often restricted to their approved service network, which may charge a premium.

An Honest Comparison: $60,000 Car over 5 Years

Let's look at a typical example. A sales rep driving 25,000 km/year with 75% work use.

Feature           Typical Novated Lease                    Our Work Use Car Loan

Transparency   Low.                                               High.                                                         Costs are bundled and opaque.         All fees & rates disclosed.

Interest Rate    Hidden                                           Transparent                                                 (Effectively 9 - 14%)                          market rate (e.g. 7 - 9%)

Admin Fees     $600 - $1,000 per year                    $0.

Choice            Restricted insurance & servicing.       Choose your own insurer &                                                                                mechanic.

Tax Benefit      Yes, but offset by high fees.              Yes. You get the full ATO                                                                                    logbook deduction.

End of Lease    Complex.                                       Simple.                                                        Forced to pay a balloon (residual)     You own the car.                                          or re-lease.                                     Or choose a balloon.

True Saving      Often minimal, or even a loss.          25-35% vs. a standard loan.

The Bottom Line

A novated lease sells you "convenience" at a premium. The Work Use Car Loan is designed to give you the same tax benefits and cash flow convenience without the hidden fees. You get the full power of an ATO logbook deduction, with none of the year long admin. You just have to do a 12 week logbook in the 1st 12 months.

Before you sign that novated lease, send us your quote. We’ll provide a free comparison to show you exactly what you're really paying.

Contact Flagship Financial today.