Buying vs Novated Lease
Australian novated lease guide and comparison.
Last verified: 2025-07-01 | 2025-26 tax rates
Buying vs Leasing: The Numbers
On an $85K salary with a $50K EV over 3 years, novated leasing saves you approximately $14,158.18 compared to buying outright.
Buy outright
$59,900.00
Paid with after-tax dollars + full GST
Novated lease
$54,454.55
Pre-tax salary sacrifice + GST free
When buying makes sense
Buying outright can be better if you earn under $45,000 (low marginal tax rate means minimal tax savings), plan to keep the car longer than 5 years, or prefer full ownership with no end-of-lease obligations.
When novated leasing wins
Novated leasing is better when you earn over $60,000 (higher tax bracket = bigger savings), want an EV (FBT exempt), and prefer bundled running costs with no surprise expenses. The higher your salary, the more you save through salary sacrifice.
What about a car loan?
A car loan is paid with after-tax dollars and you pay full GST on the purchase. Interest is not tax-deductible for personal use. A novated lease uses pre-tax dollars, saves the GST, and bundles everything into one payment. See our novated lease vs car loan comparison.
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Frequently Asked Questions
Is it cheaper to buy or novated lease a car?
For most people earning over $60,000, a novated lease is cheaper due to GST savings, income tax reduction, and (for EVs) $0 FBT. On an $85K salary with a $50K EV, leasing saves approximately $12,000-$15,000 over 3 years.
Do I own the car at the end of a novated lease?
You can own the car by paying the residual value at the end of the lease. The residual is set by the ATO and is typically 46.88% for a 3-year lease. You can pay this outright, refinance, or start a new lease.
Can I choose any car for a novated lease?
Yes, you can choose any new or used car for a novated lease. However, EVs offer the best savings due to the FBT exemption. Most lease providers have a minimum car value (typically $10,000) and maximum age requirement for used cars.
What are the downsides of a novated lease?
Potential downsides include: the residual payment at lease end, being locked into a term, finance charges built into the lease, and the need for employer involvement. If you plan to keep a car for 10+ years, buying outright may be simpler.
Is a novated lease the same as a salary sacrifice car?
Yes, a novated lease is the formal arrangement that enables salary sacrificing a car. When people say 'salary sacrifice a car', they are referring to a novated lease arrangement.
Calculate Your Exact Savings
Use our novated lease calculator with your specific salary, car, and preferences.
Open Novated Lease Calculator