When setting up a novated lease, one of the key decisions you'll make is the lease term. Most novated leases run for between one and five years, with three to five years being the most common choices.
Shorter Terms (1-2 Years)
**Pros:**
Lower residual value at end of lease
More flexibility to change vehicles
Suits those who like driving newer cars
**Cons:**
Higher weekly payments
May not suit those who plan to stay with their employer long-term
Medium Terms (3 Years)
The three-year lease is often considered the sweet spot for many drivers.
**Pros:**
Balanced weekly payments
Vehicle typically remains under manufacturer warranty
Good residual value
Reasonable flexibility
**Cons:**
Higher payments than longer terms
Longer Terms (4-5 Years)
**Pros:**
Lowest weekly payments
Maximum salary packaging benefit over time
Ideal for those with stable employment
**Cons:**
Higher residual value
Vehicle may require more maintenance in later years
Less flexibility to upgrade
Factors to Consider
When choosing your lease term, think about:
1. **Job stability** - Are you likely to stay with your employer for the full term? 2. **Driving habits** - High-kilometre drivers may prefer shorter terms 3. **Budget** - Longer terms mean lower payments but more total interest 4. **Vehicle depreciation** - Some vehicles hold value better than others
Our Recommendation
For most Australians, a three or four-year lease provides the best balance of affordability and flexibility. However, your ideal term depends on your individual circumstances. Our team can help you model different scenarios to find what works best for you.