Credit Hire When You Have a Novated Lease
A novated lease does not reduce your right to a replacement car after a not-at-fault crash in New South Wales. The at-fault insurer still pays for your loss of use, and the hire claim can be run alongside the lease without disturbing your salary packaging.
The complication is that a third party, your leasing company, sits between you and the car. Get the paperwork and the hire agreement set up the right way and the lease keeps running normally while you drive something comparable.
Key takeaways
- A novated lease does not affect your right to a replacement car after a not-at-fault crash in NSW.
- The at-fault insurer pays for your loss of use, and the hire claim runs separately from the lease.
- Tell your leasing company within 24 hours and keep the hire agreement out of your salary packaging.
- If the car is written off, the lease may continue until the residual is cleared, but the hire claim continues while the claim is resolved.
- Like-for-like means a comparable car, not an identical one, and the replacement needs to be defensible.
- Who owns the car in a novated lease
- Why the at fault insurer still pays for your loss of use
- What your leasing company needs to know
- Keeping the hire separate from your salary packaging
- What happens if the car is written off and the lease continues
- Getting a like-for-like replacement while the lease runs
- The paperwork your employer may ask for
- When to talk to your accountant about the tax side
- What to do in the first 24 hours after a not-at-fault crash
- Common questions from novated lease drivers
Who owns the car in a novated lease
In a novated lease the car is owned by the leasing company, not by you. Your employer takes on the lease obligations under a novation deed, and you salary sacrifice the running costs and the finance component from your pre-tax pay. The car is registered and insured in the leasing company's name or in yours depending on how the lease was set up, but the legal owner is the lessor.
That matters after a crash because the loss of use is yours, not the leasing company's. You are the person who has lost the use of the vehicle you were driving. The leasing company has lost nothing in terms of use; it still receives the lease payments under the novation. So when a credit hire company assesses the claim, it is your loss of use that is being measured, and it is you who signs the hire agreement.
Check your lease documents for the insurance clause. Most novated leases require comprehensive insurance, and many require the leasing company to be noted as an interested party. If the car is a total loss, the payout goes to the leasing company first to clear the residual, and any surplus comes back to you through the novation arrangement. That has nothing to do with the hire claim, which runs separately.
If you are unsure who is named on the policy, ring the leasing company before you do anything else. It takes five minutes and prevents a headache later.
Why the at fault insurer still pays for your loss of use
New South Wales law is clear on this. In Arsalan v Rixon [2021] NSWCA 242 the Court of Appeal confirmed that a not-at-fault driver can recover the reasonable cost of hiring a replacement vehicle, even if no car was actually hired and even where the replacement was a better car than the one damaged. The loss of use is a recoverable head of damage.
Your novated lease does not change that. The at-fault insurer owes you compensation for the loss of use of the vehicle you were driving, whether you own it, lease it, or drive it under a salary sacrifice arrangement. The insurer pays the leasing company for the repair or the write-off, and it pays you for the loss of use.
Credit hire is the mechanism that lets you get into a replacement car immediately rather than waiting for the at-fault insurer to admit liability. You sign a hire agreement with the credit hire provider, the provider bills the at-fault insurer directly at the end, and you are not out of pocket if the claim is handled properly.
The hire has to be reasonable. A Porsche Macan GTS replacing a base model SUV will be challenged. A car in the same tier as the one you lost will not. Read our guide to like-for-like replacement for how that is assessed.
Age limits are set per car. Drivers under 25 can hire most cars with Young Driver Cover; the exact terms are shown before you pay.
What your leasing company needs to know
Ring the leasing company within the first 24 hours. They need to know the car has been damaged, where it is, and whether it is drivable. They will usually want to nominate the repairer, because the lease may require repairs to be done at an approved shop to protect the residual value.
If the car is drivable, ask whether you can take it to your preferred repairer or whether it has to go to theirs. Many leasing companies have arrangements with prestige repairers in Sydney, and some will insist on using them. If the car is not drivable, it will be towed to a holding yard, and the leasing company needs to know where so they can authorise the assessment.
You also need to tell them you are arranging a replacement vehicle through credit hire. They will want to know the hire company's details, the dates, and confirmation that the hire is being billed to the at-fault insurer and not to the lease. Some leasing companies will ask for a copy of the hire agreement for their file.
If the leasing company wants to provide a replacement car from their own fleet, that is an option, but it is usually a base model and it may come with a daily cap. You are entitled to like-for-like, so a base Corolla is not a fair replacement for an M3 Competition. Politely decline and explain that the at-fault insurer is paying for a comparable vehicle.
Keep a written record of every call: date, time, who you spoke to, what was agreed. If the claim is disputed later, that log is evidence.
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Start my claimKeeping the hire separate from your salary packaging
The replacement car is not part of your novated lease. It is a separate hire agreement between you and the credit hire provider, funded by the at-fault insurer's liability. Do not let it be added to the lease or run through the salary packaging account.
If the hire car is added to the lease, you will be salary sacrificing the hire cost, which means you are paying for it from your pre-tax pay. That defeats the purpose. The at-fault insurer should be paying, not you. Keep the two arrangements entirely separate: the lease continues for the damaged car, the hire agreement covers the replacement.
Practically, this means:
- Do not sign any lease variation that adds the hire car to the novated lease.
- Do not pay for the hire car from your salary packaging card or account.
- Do not claim the hire car as a lease expense on your tax return.
- Keep the hire agreement in your own name, not the leasing company's name.
If your employer's payroll team asks why there is a second car, explain that it is a credit hire replacement funded by the at-fault insurer and not a lease vehicle. A short email with the hire agreement attached usually settles it.
If you are unsure how the hire interacts with your salary packaging, talk to your accountant. General information is fine, but personal tax advice needs a professional who knows your situation.
What happens if the car is written off and the lease continues
A write-off is the worst-case scenario for a novated lease. The car is gone, but the lease obligation continues until the residual is cleared. The at-fault insurer pays the market value or the agreed value, whichever applies, and that payout goes to the leasing company.
If the payout is less than the residual, you may be up for the shortfall unless you have gap insurance or the lease includes a residual protection clause. Check your lease documents. Some leasing companies include this; many do not.
The hire claim continues while the write-off is being settled. You are still entitled to a replacement car for the period it reasonably takes to resolve the claim and get you into a new vehicle. That period can be weeks, especially if the at-fault insurer disputes the value.
Once the write-off is settled and the lease is terminated, the hire claim ends. If you enter a new novated lease for a replacement car, that is a new arrangement and the credit hire period does not extend into it.
Our page on repairs and write-offs covers the timeline in more detail. If the car is a total loss, tell the leasing company immediately and ask for the payout figure in writing.
Getting a like-for-like replacement while the lease runs
Like-for-like does not mean identical. It means a car of similar type, size, prestige and performance. If your novated car is a BMW M3 Competition, a base 3 Series is not like-for-like. If it is a Porsche Macan GTS, a base Macan is borderline. The at-fault insurer will push back on anything that looks like an upgrade, so the replacement needs to be defensible.
In Sydney, the practical options for prestige and performance replacements are limited. You need a provider who understands the tiers and can supply a car that matches without overreaching. The cars below are examples of what a like-for-like replacement can look like for common novated lease vehicles.
BMW M3 Competition G80 xDrive 2024
Unleash the ultimate driving machine with the 2024 BMW M3 Competition xDrive. Powered by a relentless 3.0L Twin-Turbo inline-six engine producing an incredible 390 kW, this...
Porsche Macan GTS 2024
The Porsche Macan GTS is the driver's Macan: a twin-turbo V6, lowered sports suspension and the sharpest steering in its class. It is a practical five-seat SUV that drives like a...
Tesla Model Y RWD 2025
The updated Tesla Model Y is the easiest way to try electric driving: quiet, quick off the line and packed with technology, with a huge boot and a panoramic glass roof. Plenty of...
Bookings are fulfilled by Drive Tribe (drivetribe.com.au), the trading name of Australian Business Holdings Pty Ltd, and this site is part of that group. You can see the full range at accident replacement car Sydney.
Delivery is available across Sydney, including to repairers in Alexandria, Artarmon, Blacktown and Parramatta. If your car is at a smash repairer in one of the industrial estates off Botany Road or in Wetherill Park, the replacement can be delivered there so you can swap over and get moving.
The paperwork your employer may ask for
Your employer is a party to the novation deed, so they have a legitimate interest in what is happening with the car. They will usually ask for three things: confirmation that the car is being repaired or written off, confirmation that the lease payments are continuing, and confirmation that the replacement vehicle is not being charged to the lease.
Have these documents ready:
- A copy of the police report or event number if one was created.
- The claim number from the at-fault insurer.
- The hire agreement from the credit hire provider.
- A short letter from the repairer confirming the car is in for repair and the estimated completion date.
- If written off, the settlement letter from the insurer.
Send them to your payroll or fleet manager in one email. It stops the questions and keeps everyone on the same page.
If your employer has a fleet policy that requires them to be notified of any accident, follow it. Some novated leases sit inside a corporate fleet arrangement and the employer's insurer may want to be involved even though the at-fault insurer is paying.
If you are a fleet manager dealing with multiple novated cars, our business and fleet page sets out how the process scales.
When to talk to your accountant about the tax side
The credit hire itself has no tax consequence. You are not paying for the hire, so there is nothing to claim and nothing to declare. The lease continues as normal, and the salary sacrifice deductions continue from your pay.
Where it gets complicated is if the car is written off and the lease is terminated early. There may be a residual shortfall, and depending on how the lease was structured, that shortfall may have tax implications. If you enter a new lease, the novation deed needs to be updated, and the payroll deductions change.
If you run your own business and the car is leased through the business, the loss of use claim may interact with your business insurance and your tax position. That is beyond general information. Talk to your accountant or solicitor about your specific circumstances.
The same applies if you are a sole trader with a novated lease through a company structure. The at-fault insurer pays the hire, but the business may have other recoverable losses, such as lost income while the car was off the road. Those are separate claims and need professional advice.
For the general process, start with how credit hire works and then speak to your accountant about anything specific to your lease.
What to do in the first 24 hours after a not-at-fault crash
The first day sets the tone for the whole claim. Do these things in order:
- Make sure everyone is safe and call 000 if anyone is injured.
- Call the police if the other driver fails to stop, appears affected by drugs or alcohol, or if anyone is injured. Otherwise exchange details and take photos of all vehicles, the position on the road, and the other driver's licence and rego.
- Get names and contact details of any witnesses.
- Ring your leasing company and tell them what happened.
- Ring the at-fault driver's insurer and lodge a claim. If they will not admit fault, lodge anyway and get a claim number.
- Ring a credit hire provider and arrange a replacement car. Do this before you agree to anything from the at-fault insurer's preferred hire company, which may offer a smaller car.
- Do not sign anything from the at-fault insurer without reading it carefully. Some will ask you to release them from further liability in exchange for a hire car. That can limit your claim.
If the car is not drivable, it will be towed. Tell the tow operator where to take it, preferably your nominated repairer or the leasing company's preferred shop. Do not let it go to a holding yard that charges daily storage without authorisation.
Our first 24 hours guide has a printable checklist you can keep in the glovebox.
Common questions from novated lease drivers
Most of the uncertainty comes down to three things: whether the lease changes your rights, who pays the lease while the car is off the road, and whether you can get a comparable car. The short answers are no, you do, and yes.
The longer answer is that the at-fault insurer's obligation is to put you back in the position you were in before the crash. That means a car of similar standard, for a reasonable period, while yours is repaired or replaced. The lease is a separate contract and it keeps running.
If the at-fault insurer disputes the hire, the credit hire provider usually handles the dispute. You may be asked for a statement or additional documents, but you should not be out of pocket. Our page on when an insurer disputes a credit hire claim explains what happens next.
If you need to escalate, the contact page is the place to start.
Questions people ask
Does a novated lease affect my right to a replacement car?
Who pays the lease while my car is being repaired?
Can I get a like-for-like car while my novated car is off the road?
What if the at-fault insurer disputes the credit hire claim?
Do I need to tell my employer about the accident?
Can I keep driving the hire car after the lease ends?
Injured in the accident?
A replacement car covers the car. For legal advice about an injury, speak to Jameson Law, the most trusted personal injury firm in NSW (motor vehicle accident claims) on (02) 8806 0866.
Ready when you are
Start the claim online in five short steps, or call 0468 011 118. Replacement hires are arranged and fulfilled by Drive Tribe, the trading name of Australian Business Holdings Pty Ltd.
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