Selling a car that is on a novated lease

What a novated lease is, briefly

A novated lease is an agreement between three parties: you, your employer and a lease company. Your employer makes the lease payments out of your pay, and the car is yours to drive. The lease company is the one that is owed money on the car, which is why selling it starts with them and not with your employer.

At the end of the lease term there is a residual, sometimes called a balloon, which is the amount left to pay before the car is yours outright. Selling before the end of the term means paying out the lease early, and the payout figure covers what is left of the term and the residual, less whatever your lease company says about ending early. Those terms differ between lease companies, and the only figure that counts is the one yours puts in writing.

Step one: the payout figure

Ring your lease company, or log in to their portal, and ask for a payout figure for the car. Tell them the date you are planning to sell, because the figure changes with the date, and ask your lease company how long the figure stands. Keep the letter or the screenshot.

If you would rather we did this, we can, with your authority. Give us the lease company and your reference and we request the figure in your name. It comes back to you as well as to us.

Step two: the appraisal

This part is the same as any car we buy. We come to your home or your work, look at the whole car, read the battery state of health if it is electric or a plug in, value the charging gear that is coming with it, and make a firm offer at the car. The lease does not change the offer. It changes where the money goes.

Step three: the two numbers side by side

Now there are two numbers: the payout figure from the lease company and our offer for the car.

If the offer is more than the payout, we pay the lease company the payout directly and pay you the difference, by bank transfer, the same day.

If the payout is more than the offer, that difference is the shortfall, and it is yours to cover. We put it in writing before you sign anything, and nothing moves until you have read it and said yes. You pay the shortfall to us or directly to the lease company, whichever your lease company requires, and we pay the rest. Owing more than a car is worth partway through a lease is ordinary, because the payments are spread across the term and the value of the car is not. It is not a sign that anything went wrong.

Step four: the paperwork

The contract of sale and the transfer paperwork are signed on your phone. The lease company releases its interest in the car once it is paid, and the transfer of registration follows. Your employer stops the deductions when the lease is closed, and it is worth telling your payroll yourself rather than leaving it to the lease company.

The running costs that were bundled in

Some novated leases bundle running costs into the one payment: charging or fuel, insurance, registration, servicing. If yours does, ask your lease company how the balance is reconciled when the lease ends early, and whether anything comes back to you or is added to the payout. Ask at the same time as you ask for the payout figure, so there is nothing to discover after the car has gone.

If the car is electric

Nothing about the lease changes how an electric car is sold to us. The battery state of health is read at the car, the charging gear is valued, the payout is settled and you are paid the same day. We do not give advice on the tax side of ending a lease. That is between you, your employer and your adviser, and a car buyer who offers it is giving advice they are not qualified to give.