Unlock Melbourne’s Secrets with Our Wheels
Call Now: 1300 607 667
Unlock Melbourne’s Secrets with Our Wheels
Call Now: 1300 607 667
Getting a new vehicle in Australia is exciting. But how to pay for it is still confusing. Most people know about traditional car loans. You take a loan from the bank, buy the car, and then pay it back over time. But what if you can’t get a traditional car loan?
Don’t worry, there are also other popular ways, such as Rent to Own and novated lease. These are two different paths to driving the car you want. Each suits a different type of driver, lifestyle and income level. One is about accessibility, and the other is about tax savings.
In this blog, we’ll compare both the Rent to Own vs the novated lease program on the basis of features and ownership. It’ll help you know which program suits your needs and budget best.
A Rent to Own car is a simple and clear car ownership process. It’s an agreement where you rent a car for a set period, 1 to 3 years. You make regular weekly, monthly or fortnightly payments according to your provider.
A small amount of your payment goes towards the ownership process. Then, at the end of the contract, the car becomes yours. It doesn’t include any lump sum or hidden charges. This model is suitable for individuals who find traditional finance a bit tough. It cares more about your ability to pay rather than your credit history.
The biggest benefit of the Rent to Own process is accessibility. Traditional lenders prefer a good credit score. In contrast, many Rent to Own providers are more interested in your current situation.
They offer approval only if you have a steady income and you can pay regular payments. Moreover, there is also flexibility to choose your payment types, such as weekly or monthly. Students, residents and even new arrivals to Australia can get approved. It’s a second chance for many.
You can precisely tell what you are paying when you have a Rent to Own agreement. The amount of the payment is not subject to change. It is not affected by interest rates or market changes. This makes it exceedingly easy to budget. You know the amount you will have to save every week or fortnight.
This is the end goal. Each payment you make is a step towards the ownership of the car. When you are through with all your payments at the expiry of the contract, the car belongs to you. No balloon payment or complicated choice to make. The ownership is just transferred into your name. You have created an asset in yourself.
One of the most difficult things about purchasing a car is saving. The majority of Rent to Own agreements do not demand a substantial deposit. You only have to pay your first payment and a small administration fee often. This is because you are able to get into a trustworthy car at a much faster rate without necessarily waiting months or years to save.
It’s a specific solution for a specific group of people.
The novated lease is a bit different from this rental & Rent to Own process. It’s a three-way deal between the applicant (lessee or employee), the employer and the finance company.
The employee selects a new or old vehicle and signs a lease agreement with the provider. The employer will then accept making the lease payments out of the salary of the employee before tax. It can minimise the taxable income and generate possible tax savings.
Continuing vehicle expenses like fuel, servicing, insurance and registration are typically built into the lease payments. The employee can give back the car at the expiry of the lease period, renew the lease or pay the residual value to become the full owner.
Flexible plans, no credit checks, and simple payments
| Feature | Rent to Own | Novated Lease |
|---|---|---|
| Best For | People with bad/no credit, students, Centrelink recipients | Stable, full-time employees, especially those in higher tax brackets |
| Credit Check | Minimal or no credit check required | Standard credit and employment checks are required |
| Payment Structure | Fixed regular payments from post-tax income | Single bundled payment deducted from pre-tax income |
| Tax Benefits | None. Payments are made with after-tax dollars | Significant. Reduces taxable income, leading to tax savings |
| Car Selection | Limited to vehicles offered by the company | Wide choice. Can select a new or used car from any dealership |
| Running Costs | You pay all costs (insurance, registration, maintenance) | Costs are often bundled into the lease payment for simplicity |
| End of Term | Own the car outright after final payment | Must pay residual value to own the car or trade it in |
| Overall Cost | Generally higher than the car’s cash price | Can be more cost-effective due to tax and GST savings |
| Key Requirement | Proof of regular income to afford payments | A willing employer and stable employment |
Lease payments do come at your expense in terms of tax. This reduces your taxable income, and this means that you pay less tax. An additional amount of your income remains in your pocket.
A novated lease enables the combination of all the car costs in a single payment. This normally involves registration, insurance, fuel and servicing. Stop pursuing numerous bills on a monthly basis.
Through novated leases, it is simpler to drive a brand new or near new vehicle. You can use the latest safety features, technology and comfort without incurring the entire cost at once.
The car purchase is claimed by the finance company on the GST. This decreases the total cost of the car and part of the running costs, and the lease will be cheaper.
This option is good for people in a different financial situation.
The selection of the right deal depends on your budget, vehicle needs and financial goals.
Rent to own and novated lease offer two different roads to get your vehicle in Australia. Rent to own is all about accessibility. It assists individuals in acquiring a car where regular loans are inaccessible. It is straightforward, easy and simple and low-cost oriented. A novated lease is a tax-saving method to drive a newer car. It makes your budget easier. However, it is effective only when you have a good job, and you know the terms.
Whatever you do, research it. Read the small print, get to know all the costs and what you are expected to do. Being clear on what is available to you, you will make a confident decision and get in the right car. If you’re considering a novated lease, talking to a financial advisor can help you crunch the numbers and make sure it fits your wallet.
And if you’re going for a Rent to Own car program, choose a reliable local provider, such as I Rent to Own. Being a reliable Rent to Own car provider, they offer flexible solutions with dedicated expert support. All these plans cover all maintenance costs and registration services, allowing you to get on the road without any financial stress.
