Novated Lease vs Car Loan
Australian novated lease guide and comparison.
Last verified: 2025-07-01 | 2025-26 tax rates
Novated Lease vs Car Loan
On a $50K EV with an $85K salary: novated lease saves $14,158.18 over 3 years. A car loan at 7% costs $9,403.60 in interest over 5 years.
| Novated lease (3yr) | Car loan (5yr, 7%) | |
|---|---|---|
| Monthly payment | $1,512.63 | $990.06 |
| Paid with | Pre-tax dollars | After-tax dollars |
| GST saving | $5,445.45 | $0 |
| FBT (EV) | $0 | N/A |
| Interest paid | Built into lease | $9,403.60 |
| Running costs | Included | Separate |
Key differences
A novated lease uses pre-tax salary, saving you tax at your marginal rate. A car loan uses after-tax dollars with no tax benefit. The novated lease also saves the GST on the car and running costs, and bundles everything into one payment.
The main advantage of a car loan is simplicity and ownership from day one. You also don't need employer involvement. However, for most people earning over $60,000 who want an EV, a novated lease is significantly cheaper overall.
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Frequently Asked Questions
What is a novated lease?
A novated lease is a three-way agreement between you, your employer, and a finance company. Your employer deducts lease payments from your pre-tax salary, reducing your taxable income.
Are EVs FBT exempt on novated lease?
Yes, EVs and PHEVs under $91,387 are FBT exempt until 31 March 2027, making them significantly cheaper to salary sacrifice than petrol cars.
How much can I save with a novated lease?
Savings depend on your salary and car choice. On an $85K salary with a $45K EV, typical savings are $10,000-$15,000 over 3 years.
What happens at the end of a novated lease?
You can pay the residual value to own the car, refinance the residual, trade in and start a new lease, or hand the car back.
Can I salary sacrifice a used car?
Yes, most novated lease providers allow used cars, typically up to 7 years old at the end of the lease term. New cars generally offer better value due to GST savings.
Calculate Your Exact Savings
Use our novated lease calculator with your specific salary, car, and preferences.
Open Novated Lease Calculator