A novated lease does not have to mean a new car. Used cars, and in many cases the car sitting in your driveway, can be packaged the same way, and on a lower purchase price the saving per dollar is often better because the residual and the interest are smaller. The rules are set by the financier rather than the ATO, and they turn on three things: the car's age at the end of the lease, where it is bought, and, for an EV, when it was first driven.
Quick answer: Most providers will novate a used car that will be under 10 to 12 years old when the lease ends (some stretch to 15), worth at least about $5,000, bought from a dealer or a private seller with a valuation. GST on the purchase is only saved when you buy from a GST-registered dealer.
The age rule
Financiers set a maximum age at the end of the lease, not the start. A five-year lease on a car that is already seven years old ends with a twelve-year-old car, which sits at most providers' limit. Common positions in 2026: under 12 years at lease end and a minimum value around $5,000 at mainstream salary packagers; under 10 years at some financiers; up to 15 years at a few, usually for prestige models that hold value. Shorten the term or choose a younger car if you are near the line.
GST: where you buy from matters
On a new or dealer-sold used car, your employer claims the GST in the price (up to the $69,883 car limit, a maximum credit of $6,353) and passes the saving through. On a private sale there is no GST in the price, so there is nothing to claim: the amount financed is the full purchase price. You still get pre-tax running costs and GST-free servicing, tyres, insurance and fuel, which is where most of the running-cost saving sits anyway.
Private-sale cars also need a valuation and usually a roadworthy certificate before the financier will settle, and the price must be at or below market value.
Used electric cars and the FBT exemption
The exemption follows the car's history, not the lease. A used EV qualifies if it was first held and used on or after 1 July 2022 by anyone, luxury car tax was never payable on it (it was at or below the fuel-efficient threshold when first sold, $91,661 in 2026-27), and it is a battery electric or hydrogen car. That makes 2023-and-later used EVs some of the best-value novated leases available: a lower price, no FBT, no post-tax contribution. A 2021 EV, however cheap, can never be exempt, and a used plug-in hybrid is not exempt on a new lease. The FBT and EV guide has the full test.
Novating the car you already own
A sale-and-leaseback lets you package a car you own outright or have nearly paid off. The financier buys it from you at an agreed valuation (which you receive as cash, sometimes used to clear an existing loan), then leases it back to you on a novated lease. Because the financier is buying from a private individual there is no GST credit on the purchase, so the benefit is the pre-tax, GST-free running costs and the lease payments coming out before tax. It suits people with a young car who want the running-cost packaging without changing vehicles; it does not suit an old car close to the age limit.
The residual on a used car
The ATO minimum residual percentages apply to the amount financed whatever the car's age: 65.63% after one year, 46.88% after three, 28.13% after five, plus GST when paid out. On a used car the financed amount is lower, so the residual is smaller in dollars, and because used cars lose value more slowly the residual is more often at or below market value at the end. The risk of a residual above the car's worth, which catches people on new cars in a soft market, is lower.
When a used-car lease beats a new one
- The saving on running costs is the same whether the car is new or used, so a cheaper car keeps more of the benefit.
- The Employee Contribution Method on a non-exempt car is 20% of the car's value: a $25,000 used car needs $5,000 post-tax, a $50,000 new one $10,000. On a petrol car the used option can be the only one that clears a decent saving.
- Interest is charged on a smaller amount and the residual is smaller.
Against that, warranty may have expired (servicing and repairs are packaged pre-tax, which softens it), and some providers charge a higher rate or fee on used cars. Put the actual quote through the calculator with the car's price and the provider's rate.
Compare a used car against a new one
The calculator shows the mechanics. A provider quote adds the exact interest rate, fees and running-cost budget for your car and employer. Get two or three quotes and compare them line by line against the figures above before you sign.
See how a novated lease worksFrequently asked questions
Can you get a novated lease on a used car?
Yes. Most providers accept used cars from dealers and, with a valuation and roadworthy, from private sellers. The common financier rule is that the car must be no older than 10 to 12 years at the end of the lease term (some allow up to 15), with a minimum value around $5,000.
Can I novate a car I already own?
Often, through a sale-and-leaseback: the financier buys the car from you at an agreed value and leases it back on a novated lease, and you package the running costs. GST is not claimable on a car bought from a private individual, so the purchase-price saving disappears, but the running-cost and tax benefits remain.
Is a used electric car FBT exempt on a novated lease?
Only if the car was first held and used on or after 1 July 2022 by anyone, luxury car tax was never payable on it, and it is a battery electric or hydrogen car. A 2023-plated used EV can qualify; a 2021 one cannot.
What is the residual on a used car novated lease?
The same ATO minimums apply to the amount financed: 46.88% after three years, 28.13% after five. Because a used car depreciates more slowly in dollar terms, the residual is often close to the car's market value at the end, which reduces the risk of owing more than the car is worth.
Age limits and minimum values are financier policies and vary; confirm with the provider quoting you. Tax figures are 2026-27 ATO parameters. General information, not financial or tax advice.