Lease or Buy

What’s right for you?

Car loans make ‘buying’ easy

Although most Australians prefer to buy their vehicles outright, not everyone can afford to do so. And that’s when the decision to lease or buy comes in.

Car loans make ‘buying’ easy

With a car loan, you’ll take ownership of the vehicle at the time of purchase. You then make a set number of repayments over the term of the loan – usually three to five years. Once your loan is paid off, you own your car outright.

Leasing lets you use the vehicle ‐ not own it

When you lease a car, you’re paying for the use of the vehicle over a set term. Broadly speaking there are two main types of lease:

  1. An operating lease is like a rental agreement. Once the lease term ends you hand over the vehicle and no longer make payments.
  2. A finance lease allows you to buy the car at the end of the lease with a lump sum payment. Alternatively, you can choose to swap the lease to a new vehicle and continue making payments. Finance leases are popular in businesses because it’s a way of providing employees with cars without substantial upfront investments.

What’s a novated lease?

A novated lease is a finance lease which is paid off by your employer from your before‐tax salary. This reduces your taxable income, making it cost‐effective for both parties. The downside of novated leases is that you may become responsible for the lease payment if you move jobs. Your new employer may not agree to make payments on your behalf.

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