You’ve probably heard of novated leases and were considering getting one only to find out that your company doesn’t offer a novated lease. Novated leases on paper are a great option. It’s an appealing way to finance a car that lets you pay running costs from your pre-tax salary, potentially saving you a fair bit on income tax. Now just because a novated lease might be off the table for now, it doesn’t mean you don’t have other options to drive a reliable and new car without purchasing it outright. A car subscription provides flexible access to a car without high upfront costs. Car subscriptions are a more transparent alternative to novated leases. Unlike novated leases, that are often riddled with hidden terms and conditions, surprise fees and the requirement to buy out your car at the end through a residual payment, a car subscription prioritises simplifying car access without demanding a long term commitment.

Car Subscription: Solving the long-term commitment a novated lease requires

Car subscription is a game-changer in the automotive landscape. It doesn’t tie you to a single car and lock you in to risks of depreciation and falling car prices. After every term you swap into a new car, ensuring you’re not stuck with an old car. A novated lease usually requires a 3-5 year commitment and you’re required to pay for the car you’ve depreciated at the end of the term. While it offers short term savings, it exposes you to risk at the end of the term. This risk is generated through the calculation of the residual value based on the car’s value when you start the lease, most novated lessees end up paying out a higher residual payment than what the car is worth in the market when they finish up on their lease. 

So maybe your employer not offering a novated lease is actually a blessing in disguise.

Why a car subscription is your go-to if your employer doesn’t offer a novated lease:

1. No employer involvement required: your car, your choice

This is perhaps the most significant advantage for those whose employers don’t offer novated leases. Car subscription is a direct agreement between you and the subscription provider. There’s no need for your HR department to get involved, no complex salary sacrifice agreements, and no waiting for internal approvals. You apply directly, choose your car, and drive away. This streamlined process removes a significant barrier, putting you in control of your car access without relying on your workplace’s policies.

2. Financial predictability without the headaches : All-inclusive weekly fee

One of the biggest financial stresses of car ownership is the cascade of unexpected costs. Registration, insurance premiums, routine servicing, sudden mechanical failures, and even tyre replacements can quickly add up and throw your budget into disarray. According to the Australian Automobile Association’s Transport Affordability Index released in December 2024 service, tyres, registration, maintenance, CTP and insurance can cost more than $6,400 a year or $533/ week. With a car subscription like Karmo, these are all bundled into one simple, predictable weekly payment.

This means:

• No more budgeting for annual rego and insurance renewals.
• No surprise repair bills.
• Scheduled servicing is handled by the provider.
• Roadside assistance is included.

You gain complete financial clarity, making it easier to manage your budget and enjoy driving without the constant worry of hidden expenses.

3. Term flexibility: Drive what you need, when you need it

Novated leases lock you into multi-year contracts. What happens if your circumstances change? You might want to switch jobs or you might need a larger car for a growing family, a smaller, more fuel-efficient vehicle for a new commute, or perhaps you move to a city where a car isn’t essential. Breaking a novated lease or terminating a novated lease early can be expensive with the termination penalties. 

Car subscription, particularly with providers like Karmo, offers unparalleled flexibility. You can choose a subscription term that suits your immediate needs – often ranging from a few months. And crucially, at the end of your chosen term, you have options:

• Return the car: If your needs change or you no longer require a vehicle, you simply hand it back.
• Swap to a different model: Need an SUV for a road trip, then a hatchback for city living? With car subscription, you can easily switch vehicles to match your evolving lifestyle. Karmo even allows for regular car upgrades, ensuring you’re always driving a new model (often with mileage limited to 15,000km for a “new car” experience).
• Extend your subscription: If you’re happy with your current ride, you can simply renew for another term.

This adaptability is a stark contrast to the rigidity of novated leases or car loans, giving you the freedom to adapt your vehicle to your life, not the other way around.

4. Say goodbye to high residual payments

A common feature of novated leases is the “residual value” or “balloon payment” at the end of the term. This is a lump sum you’re required to pay if you want to own the car outright. The residual value is typically a pre-determined percentage of the car’s initial value, set by ATO guidelines, and it can be a substantial amount – often tens of thousands of dollars. While you have options like refinancing or trading in, it’s still a significant financial hurdle to consider at the end of your lease.

With a car subscription, the concept of a residual payment simply doesn’t exist. You’re not buying the car; you’re subscribing to its use. At the end of your subscription term, you return the car, and your financial obligation for that vehicle ends. This eliminates the stress of coming up with a large lump sum or worrying about the car’s depreciated value. It’s a clean break, giving you greater financial freedom and peace of mind.

5. Transparency and no hidden fees: What you see is what you get

One of the most frustrating aspects of a novated lease agreement is the hidden fees – setup charges, early termination penalties, management fees, and more. These can quickly erode any perceived savings.

Karmo prides itself on this, and is committed to transparency. It offers:

• No application or signup fees: The process is designed to be straightforward and accessible.
• No early termination fees (after a minimum term): While most services have a minimum subscription period, once that’s met, you can often cancel with a reasonable notice period (e.g., 30 days) without incurring hefty penalties. This is a massive departure from traditional leases.
• No management fees: The all-inclusive weekly fee truly means all-inclusive for the operational aspects of the car.

This commitment to transparency means you can budget confidently, knowing exactly what you’ll pay each week without any nasty surprises lurking in the fine print.

Is car subscription right for you?

If your employer doesn’t offer a novated lease, or if the flexibility and simplicity of car access appeal more to you than long-term ownership, a car subscription is a compelling alternative. It’s ideal for:

• Individuals seeking flexibility and convenience in their vehicle access.
• Those who enjoy driving new cars and experiencing the latest models regularly.
• People who want to avoid the financial burden of depreciation, maintenance, and unexpected repairs.
• Anyone who prefers a straightforward, all-inclusive payment model.
• Businesses looking for flexible fleet solutions without capital expenditure.

While novated leases offer undeniable tax benefits when available, car subscription provides a modern, hassle-free, and flexible solution for reliable car access that doesn’t require jumping through employer hoops. It’s a testament to how personal mobility is evolving, offering more choice and convenience than ever before. So, don’t let your employer’s novated lease policy be a roadblock. Explore car subscription – it might just be the smarter, simpler way for you to drive.