Compare finance types
Novated lease vs Sale and leaseback: which is right for your business?
The main difference between a novated lease and a sale and leaseback is how they are secured and repaid: a novated lease suits salaried employees on higher marginal tax rates whose employer offers salary packaging, while a sale and leaseback suits asset-rich businesses needing working capital for growth, a contract or a tax liability.
Novated lease vs Sale and leaseback at a glance
| Novated lease | Sale and leaseback | |
|---|---|---|
| What it is | A novated lease is a three-way agreement between an employee, their employer and a financier, where the employer deducts the lease payments and running costs from the employee’s pre-tax salary. The employee chooses and uses the car; the obligation moves with them if they change jobs. | Sale and leaseback is an arrangement where you sell equipment your business already owns to a financier for its market value and immediately lease or finance it back, releasing cash while keeping the asset in daily use. It converts equity locked in plant into working capital. |
| Amount | $15,000 – $150,000 | $20,000 – $2,000,000 |
| Term | 12–60 months | 12–60 months |
| Indicative rate | 6.9% – 13.5% p.a. | 8.5% – 18% p.a. |
| Rate type | Fixed | Fixed |
| Security | Secured by the asset | Secured by the asset |
| Repayments | Deducted each pay cycle from salary | Monthly |
| Typical speed | 3–10 business days including employer sign-off | 3–10 business days including valuation |
| Best for | Salaried employees on higher marginal tax rates whose employer offers salary packaging | Asset-rich businesses needing working capital for growth, a contract or a tax liability |
| Consider the other if | Contractors, sole traders, people in insecure employment, or low-value used car purchases | Older, low-value or specialised equipment with a thin resale market |
| Tax | Involves income tax, GST and FBT interactions. Eligible EVs and PHEVs may attract an FBT exemption. Get advice from your accountant and employer. | A sale may trigger a balancing adjustment against the asset’s written-down value. Get accounting advice before proceeding. |
Rates shown are indicative ranges observed across our lender panel for the period stated. They are not an offer or quote. Your rate depends on your business, the lender, the amount, the term and the security offered. The lender makes the final credit decision.
When to choose a novated lease
A novated lease is usually the better fit for salaried employees on higher marginal tax rates whose employer offers salary packaging. Its main advantages are payments and running costs come from pre-tax salary, gst savings on the vehicle price and running costs, one bundled payment covers fuel, servicing and insurance. Consider the alternative if contractors, sole traders, people in insecure employment, or low-value used car purchases.
When to choose a sale and leaseback
A sale and leaseback is usually the better fit for asset-rich businesses needing working capital for growth, a contract or a tax liability. Its main advantages are releases capital without losing the use of the asset, priced as secured finance, not unsecured lending, no property security required. Consider the alternative if older, low-value or specialised equipment with a thin resale market.
Novated lease
A novated lease is a three-way agreement between an employee, their employer and a financier, where the employer deducts the lease payments and running costs from the employee’s pre-tax salary. The employee chooses and uses the car; the obligation moves with them if they change jobs.
Sale and leaseback
Sale and leaseback is an arrangement where you sell equipment your business already owns to a financier for its market value and immediately lease or finance it back, releasing cash while keeping the asset in daily use. It converts equity locked in plant into working capital.