Buying a Vehicle that Was on a Novated Lease: What You Need to Know
Novated leases are one of Australia's most popular salary packaging arrangements. At the end of the lease term, the vehicle is typically purchased outright by the lessee and then sold privately. But if the lease hasn't been formally terminated — or if the vehicle is being sold while still in the lease period — serious risks arise.
How Novated Leases Work
In a novated lease arrangement:
1. The employee selects a vehicle
2. The employer "novates" (takes on) the lease obligations
3. The lease payments are deducted from pre-tax salary
4. At the end of the lease term, the employee can purchase the vehicle at the residual value, extend the lease, or return the vehicle
The key point: during a novated lease, the finance company technically holds the security interest over the vehicle. This is registered on the PPSR.
The Risk of Buying an Active Lease Vehicle
If an employee sells a vehicle that is still under an active novated lease without settling the residual:
This is not uncommon — employees who leave employment sometimes lose the salary packaging benefit and sell the vehicle without properly settling the lease.
How to Protect Yourself
2. If finance is found, ask the seller to provide a written discharge letter from the finance company before settlement
3. Alternatively, pay the residual directly to the finance company from the purchase price at settlement
What Ex-Lease Vehicles Often Look Like
Well-maintained with complete service history (most fleets require servicing at correct intervals). Wondering how they stack up against other budget options? See our comparison of ex-government vs ex-rental vs ex-lease cars. However:
The Smart First Step
Before purchasing any vehicle, check its PPSR status. A National VIN Check tells you in 60 seconds whether any finance — including novated lease arrangements — is registered. Run your check now.