What is a deed of novation?

It is the document at the centre of every novated lease, it is the one people are most nervous about signing, and it does something much simpler than its name suggests.

What it does

You enter into a finance lease with a financier for the car. On its own, that is an ordinary lease between you and the lender. The deed of novation is a second document that transfers some of your obligations under that lease to your employer, for as long as you work there.

That transfer is what allows the payments to be made from your pre-tax salary. Without it there is no novated lease — just a car loan.

Who signs it

You, as the employee and the lessee.
Your employer, as the party taking on the payment obligation while you are employed.
The financier, as the party owed the payments.

In practice your salary packaging provider coordinates the signatures, because they administer the arrangement on the employer’s behalf. You are usually not chasing anyone yourself.

Worth knowing

The employer party is the employing entity, not your manager or your local site. In larger organisations — particularly government departments — the signatory sits well above the person you report to, which is why these go through the packaging provider rather than around your team.

It is the same document either way

This is the part relevant to arranging your own finance. A deed of novation is the same instrument whether the financier was bundled into your provider’s quote or chosen by you. Same three parties, same effect, same process.

So a provider who tells you they cannot administer an externally financed lease is not describing a document problem. They are describing either their own process or your employer’s arrangement, and those are worth telling apart — only the second is settled.

What happens when you leave

The novation ends and the obligations revert to you. The finance lease itself continues — it was always yours. You can novate it again with a new employer if they offer salary packaging, or continue the payments directly.

This is a feature of novation generally rather than anything to do with who financed the car, and it works the same way on a self-managed lease.

What to check before you sign

The financier, amount financed, term and residual match the finance approval you were given.
The vehicle details are correct, including the variant.
You understand what happens at the end of the term, and what the residual is.
You have the fee schedule from your salary packaging provider in writing.
The dealer tax invoice is made out to the financier rather than to you — a wrong purchaser here is the most common cause of a delayed settlement.

Common questions

What is a deed of novation on a novated lease?

It is a document that transfers some of your obligations under a car finance lease to your employer for as long as you work there. That transfer is what lets the payments be made from your pre-tax salary. It is signed by three parties: you, your employer and the financier. Without it you simply have an ordinary car loan.

Who signs the deed of novation?

You as the employee, your employer as the party taking on the payment obligation, and the financier. Your salary packaging provider normally coordinates the signatures because they administer the arrangement on the employer’s behalf. The employer signatory is the employing entity rather than your direct manager, which in larger organisations sits well above your own team.

Is the deed different if I arrange my own finance?

No. It is the same instrument with the same three parties and the same effect, whether the financier came bundled in your provider’s quote or you chose them. A provider declining to administer an externally financed lease is describing their own process or your employer’s arrangement, not a problem with the document.

What happens to the deed of novation if I leave my employer?

The novation ends and the obligations revert to you. The finance lease itself continues, because it was always in your name. You can novate it again with a new employer who offers salary packaging, or continue the repayments directly. This works identically whether or not you arranged the finance yourself.

Get a quote on the same car

Send the car you have been quoted on and we will price the finance separately, so you can see what the bundled quote was charging for it.