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Deed of Novation

This article provides some information around the deed of novation document required in a novated lease.


In a novated lease, an employee leases a motor vehicle and the lease is novated, that is, the employer agrees to take on the obligations of making the lease payments. However, the employee continues to use the vehicle as per the original terms of the lease.

A lease is novated with a three-way agreement ("Deed of novation") between an employer, employee and the finance company, under which the employee, who has leased a vehicle from the finance company, the financier and the employer agree that the employer will take on the employee's obligations under the lease.

If the employee ceases to be employed by that employer, the lease is re-novated back to the employee and all obligations assumed by the employer under the novation agreement revert to the employee. The lease can subsequently be novated to a new employer. Once the term of the lease has expired, all obligations of the employer cease.


Novation refers to the process of substituting an existing contract with a replacement contract, where the contracting parties reach a consensus. One of the contracting parties in the original contract is replaced by an entirely new party that assumes the rights and obligations of the original party.