novated lease car

Company Cars vs. Novated Leasing: Which Option Makes More Business Sense?

For decades, providing a company car was seen as a standard perk for employees in certain roles. But in today’s climate, where businesses are focused on cost control, tax efficiency, and administrative simplicity, many are reconsidering whether owning and managing a fleet still makes sense.

In contrast, novated leasing offers a flexible, low-cost alternative that shifts vehicle responsibility to the employee while delivering meaningful benefits for both parties.

In this article, we’ll compare company-owned vehicles and novated leases across cost, tax, administration, and employee experience—helping you decide which approach is best for your business.

1. Financial Comparison: Company Cars vs. Novated Leasing

Providing a company car comes with a substantial cost to the employer. Whether buying outright or leasing, the business bears the expense of the vehicle itself, as well as ongoing maintenance, registration, insurance, and fuel.

Company Cars:

  • Requires significant upfront capital or long-term lease commitments.
  • Business carries the cost of servicing, repairs, and vehicle depreciation.
  • Ongoing operating costs add to the total cost of ownership.

Novated Leasing:

  • The employee selects and funds the car through pre-tax salary deductions.
  • All costs, including running expenses, can be bundled into the lease.
  • No capital outlay or asset management required by the employer.

Summary: Novated leasing eliminates the financial burden of vehicle ownership for the employer while providing employees with affordable vehicle access.

2. Tax Considerations and Implications

Tax treatment is another area where the two models diverge. While both are subject to Fringe Benefits Tax (FBT), novated leasing offers more flexibility in managing and potentially reducing this liability.

Company Cars:

  • FBT is calculated on the vehicle’s value and must be paid by the employer.
  • GST credits may apply to fuel and maintenance, but these must be managed and reported.
  • Depreciation and asset write-downs require tax accounting.

Novated Leasing:

  • Employees often make post-tax contributions that offset FBT.
  • Electric vehicles under the luxury car tax threshold may be FBT-exempt.
  • GST on the purchase price and running costs is not paid by the employee.
  • Employer payroll tax can be reduced due to lower gross salary.

Summary: Novated leasing offers several avenues for tax efficiency with fewer compliance requirements on the business side.

3. Administrative Burden: Fleet Management vs. Outsourcing

Managing a fleet requires time, resources, and dedicated processes. This administrative overhead can weigh heavily on HR and finance teams.

Company Cars:

  • Employers must track vehicle use, schedule servicing, manage insurance, and coordinate repairs.
  • Fuel cards, logbooks, and asset depreciation tracking add to the workload.
  • At end-of-life, the business must manage disposal or resale of the vehicle.

Novated Leasing:

  • Leasing providers handle all vehicle-related administration.
  • Employers simply deduct payments from salary and forward them to the provider.
  • No vehicle tracking, asset management, or upkeep responsibilities.

Summary: Novated leasing dramatically reduces the employer’s administrative burden, freeing internal resources.

4. Flexibility and Employee Experience

The modern workforce expects personalised and meaningful benefits. Novated leasing delivers flexibility that traditional company cars typically do not.

Company Cars:

  • Often limited to a few approved models.
  • Shared or pooled vehicles may not align with employee needs or lifestyles.
  • Lack of personal ownership can reduce engagement with the benefit.

Novated Leasing:

  • Employees choose a vehicle that suits their lifestyle.
  • Full use of the car for personal and business purposes.
  • Option to upgrade or return the vehicle at lease-end.

Summary: Novated leasing increases employee satisfaction and engagement through greater autonomy and choice.

Learn More: Why Novated Leasing is Becoming a Must-Have Perk for Employees?

5. Final Verdict: Which Is Right for Your Business?

When comparing company cars vs novated leasing, the advantages of novated leasing are clear, especially for businesses looking to reduce costs, streamline administration, and offer flexible benefits.

Novated leasing provides:

  • A cost-neutral benefit for the employer.
  • Tax advantages and simplified compliance.
  • A more attractive, personalised benefit for employees.
  • A scalable alternative to maintaining a fleet.

If your business is still relying on company-owned vehicles, it may be time to reconsider. Offering novated leasing can deliver long-term value to both your bottom line and your workforce.

Interested in exploring novated leasing for your business? Talk to One Car Group today to learn how simple and effective it can be.