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What is a Partial Novated Lease

Home >> What is a Partial Novated Lease





Most people know that Novated lease agreements are contracts between three parties however, many people do not know that there is something known as a partial and split Novated lease. The following paragraphs will answer questions such as what is a partial Novated lease and how is it different from a split Novated lease.

Under a regular Novated lease agreement, the lender provides a vehicle, the employee takes the vehicle for business or personal use and the employer is responsible for the vehicle’s monthly payments. All the payments that are made towards the lease agreement under this type of contract are paid from the employee’s pre tax salary income package.

If the employee opts for a fully maintained lease then he does not have to pay registration, insurance and certain other fees separately since the employer pays for these fees through 1 monthly payment. This monthly payment goes to the lender who then distributes the acquired funds to various third parties such as car insurance companies or road side assist companies. If the employee decides to opt for a non maintained lease then the employer is not responsible for paying for additional fees from the employee’s salary and the employer only pays for the basic lease agreement. Instead the employee pays for all these costs.

The main difference between a fully maintained Novated lease and a full operating lease is that the employee has to pay the residual value of the vehicle at the end of the contract in a fully maintained Novated lease, where as the employee is not responsible for paying this residual value in a full operating lease. The term operating indicates that the employee only uses the vehicle and returns it in a good condition when they contract has either been terminated or is over.

Full or Split full agreements involve the revocation of the original agreement. In addition, the car is supplied by the lender directly to the employer. The employer then takes full possession of the vehicle even if the employee is responsible for paying the residual value of the vehicle at the end of the contract’s tenure.  A partial Novated agreement on the other hand involves two separate contracts.

The first contract is between the employer and the employee where in the employee sub leases the vehicle to the employer. The employer agrees to pay for the lease agreement that is contained in the lease between the other parties that is the lender and the employee. Alternately, the employer may sign an additional contract directly with the lender rather than opting for a sub lease agreement with the employee. While learning what is a partial Novated lease, it is important to note that in a partial Novated lease agreement, the head lease agreement does not have to be revoked.