Under a novated lease arrangement, the employer takes over all or part of the lessee’s rights and obligations under the lease. This transfer of rights and obligations is agreed to in a deed of novation between the employer, the finance company, and the lessee. The lessee is usually the employee or an associate of the employee.
Types of Novation
• Full or Split Novation
• Partial Novation
Full or Split Novation Agreement
• Under a full novation arrangement, the employer is responsible for making the lease payments and guaranteeing the vehicle’s residual value at the end of the lease.
• Under a split full novation arrangement, the employer is responsible for making the lease payments but not for guaranteeing the vehicle’s residual value at the end of the lease. The employer retains this obligation.
Partial Novation Agreement
Partial novation arrangements usually have two distinct lease agreements that is a lease agreement between either:
• The finance company and the employee for the vehicle
