What’s the Difference – and Which One Suits You?
If you’re funding a work vehicle, you’ll usually come across three main options:
- Novated Lease
- Operating Lease
- Chattel Mortgage
They all help you get a vehicle, but they differ in ownership, tax treatment, GST, cash flow, and balance sheet impact. The right choice depends on how you’re set up and what you’re trying to optimise and not just the car itself.
Choosing the wrong structure can quietly cost more over time. The right one can improve cash flow and tax efficiency.
Novated Lease (Employees)
A novated lease is for PAYG employees who package a vehicle through their employer using salary deductions.
Best suited to: Employees wanting bundled running costs and potential tax advantages.
Key feature: Costs are paid from salary (often partly pre-tax), improving cash flow.
Operating Lease (Businesses)
An operating lease is like a long-term rental for business vehicles. The leasing company owns the car and your business pays a fixed monthly fee to use it.
Best suited to: Businesses, NFPs and fleets wanting simplicity and no resale risk.
Key feature: Lower admin and predictable operating costs.
Chattel Mortgage (Businesses)
A chattel mortgage is a business vehicle loan. Your business owns the car from day one, and the lender holds it as security.
Best suited to: GST-registered businesses wanting ownership and tax deductions.
Key feature: Potential GST credits and depreciation claims.
Which One Is Right?
It depends on:
- Employee vs business owner status
- Tax position
- Cash flow priorities
- GST registration
- Ownership preference
- Admin capacity
Structure first, vehicle second – usually delivers the better financial outcome.
If you’re unsure, SupaLease can run a quick comparison and recommend the most suitable option based on your situation.
