What Happens at the End of a Novated Lease?

A novated lease ends with one payment still owing, and most people only find out what that means when the leasing company's letter arrives. Here is what the residual is, the four ways to finish the lease, and how to tell whether selling the car leaves you money in hand.

Do You Own the Car at the End of a Novated Lease?

No. For three or five years the payments come out of your pay before tax and the car sits in your driveway, so it feels like yours. On paper it belongs to the leasing company until the residual is paid.

Your employer is part of the deal too. A novated lease is a three-way agreement between you, your employer and the leasing company. When the lease ends the salary deductions stop, and whatever you decide next happens outside your pay unless you sign a new lease. Most leasing companies write to you a few months before the end date with the residual and your options. If you are inside the last six months and haven't heard anything, ring them and ask.

How Is the Residual on a Novated Lease Worked Out?

The residual isn't a number the leasing company picks. The ATO sets minimum residual values for car leases as a percentage of the car's cost, based on the lease term.

Check one thing on your letter: whether the residual includes GST. A lot of leasing companies quote it before GST and add GST when you pay it out, which pushes the real figure up by 10%. Ask for the exact amount to end the lease on a set date, including GST and any fees.

What Are Your Options When a Novated Lease Ends?

If you go the upgrade route, check the trade-in figure you are offered on the old car against what someone else would pay. Convenience is real, but it is easy to give away a few thousand dollars of equity in the switch. Our guide to how dealer trade-ins work explains where that money goes.

When Does Selling a Novated Lease Car Make Sense?

Selling wins when the car is worth more than the residual and you don't need to keep it. That happens more often than people expect on utes, SUVs and Toyotas that hold their value, because the ATO residual is a fixed percentage while the market price isn't. If the car is worth $28,000 and the residual is $21,000, you walk away with roughly $7,000 and no more repayments.

It also makes sense when you want out of the car anyway: a move interstate, a bigger family, or a new job where the employer doesn't offer salary packaging.

It doesn't work when the car is worth less than the residual. Electric cars are the obvious case right now. Used EV prices have fallen since 2023 as new EVs got cheaper, and plenty of EVs leased under the FBT exemption carry residuals set when prices were higher. Run the numbers before you assume there is equity.

How Do You Sell a Novated Lease Car?

1. Get the payout letter. Ask the leasing company for the exact amount to end the lease on a set date, including GST and fees. That is the number that matters, not the residual printed in your original contract.
2. Tell your employer. Payroll needs to know the lease is ending so deductions stop at the right time.
3. Get an offer on the car. Put it next to the payout figure. The gap between them is your equity, or your shortfall.
4. Let the buyer pay the leasing company. A licensed dealer pays the leasing company directly from the purchase price, so you don't have to find the residual first. Most private buyers won't do this, which is why most novated lease cars go to dealers.
5. Collect the difference. Whatever is left after the leasing company is paid goes into your account.

The payout side works the same way as any car with money owing on it. Our guide to selling a car with finance owing covers it step by step, and transferring rego in QLD covers the paperwork once the car is clear.

What If the Car Is Worth Less Than the Residual?

Then selling leaves a gap, and you pay it to the leasing company before the car can be released. If the residual is $30,000 and the best offer is $26,000, you need to find $4,000.

The other options are still there. Refinancing the residual spreads the hit over time. Re-leasing pushes the problem down the road, which can make sense if you were going to keep the car anyway. What you can't do is hand the keys back and walk away, because the residual is a debt.

Frequently Asked Questions

Useful Government Resources

Sell Any Car Fast is a licensed QLD motor dealer (DLN 4871214). This guide is general information, not financial or tax advice. Check your own lease contract and talk to your leasing company or accountant about your situation.