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Should you lease a car?

By Which Car Staff, 28 Oct 2016 Car Advice

leasing vs purchasing a vehicle

Leasing can be an effective way to acquire to a new car but it’s not for everyone.

The tax deductions available can make leasing a car an attractive option to the self-employed and some employees.

Rather than borrowing money to buy a car, a lease is a contract under which you pay for the use of the car.

When the term is up, you hand the car back, though it is possible under some types of lease to buy the car at the end of the term.

A car lease can also offer simplicity because it can include running costs – you pay a monthly amount and let the lease company take care of it.


If you own a business or are planning to buy your next car under a salary sacrifice agreement, it’s important to have the right kind of lease or finance to make the most of your deductions.

For an employee, a novated lease lets you make monthly repayments and running costs come out of your pre-tax salary, reducing your taxable income.

Business owners are better served with hire purchase finance or a chattel mortgage, which allows you to claim back GST upfront.

Although the tax deductions available in some situations can reduce the cost of owning and operating a vehicle, there’s no escaping the fact that the remainder comes out of your pocket. It pays to seek personal financial advice and to do your sums before you jump in and sign on the line.


  • A salary sacrifice arrangement can save you a lot, especially for those in higher tax brackets
  • Not all leases give operators the option to buy the car outright at the end of the term
  • Businesses can claim an immediate tax deduction for the purchase price of vehicles below $20,000 until June 30, 2017

Need to know more? Now read about how to finance your next car.