What does a novated lease actually cost you?
Most novated-lease calculators are run by lease sellers and only show an inflated “tax saving”. This one is independent. It shows your true net position — after the residual you still owe, finance interest, fees and GST — against buying the same car with a loan, or keeping the car you have.
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Advanced & comparison assumptions
That’s +$5,317/yr — a genuine after-tax comparison, including the $16,878 residual you’ll still owe and your assumed $22,000 resale.
“Keep your current car” is a cash reference only — you don’t end up with the new car, so it isn’t a like-for-like swap.
| Finance (amortised to residual) | $10,766/yr |
| Running costs (packaged, GST-excl.) | $4,673/yr |
| Admin / management fee | $600/yr |
| Salary-sacrificed pre-tax | $16,039/yr |
| Post-tax (ECM) contribution | — |
| Tax reduced (a sub-component, not your saving) | −$5,132/yr |
| Net from your pocket | $10,906/yr |
| Residual to own it (GST-incl., at end) | +$16,878 |
| Less resale of the car | −$22,000 |
| True net cost over 5 yrs | $49,409 |
Ready to get real quotes?
Compare offers from several novated-lease providers — we’re independent, so you see them side by side, not a single sales funnel.
- The residual is a real debt. You’ll owe $16,878 at the end to own the car — budget for it, refinance, or re-lease.
- Reportable fringe benefit. This creates an RFBA of about $22,642 on your income statement, which counts toward HELP/HECS, the Medicare Levy Surcharge and means-tested benefits.
- Borrowing power. A novated lease is a liability that can reduce how much a bank will lend you for a home.
- EV exemption may not last. PHEVs already lost eligibility for new arrangements from 2025-04-01; the EV FBT exemption is under review and could be wound back for future arrangements.
Estimates only · FY2025-26 rates as at 2025-07-01 · not financial advice.
How a novated lease actually works
A novated lease is a three-way agreement between you, your employer and a finance company. Your employer takes the lease payments out of your salary — partly before tax and partly after tax — which lowers your taxable income. Running costs (fuel or charging, insurance, rego, servicing, tyres) are usually bundled in, and because the financier claims the GST, you finance the car GST-exclusive.
That sounds like free money, and that is exactly how it is sold. The catches are what an honest calculator has to show you:
1. The residual (balloon) payment
At the end of the lease you do not own the car. You owe a lump-sum “residual”, set by an ATO minimum that depends on the term (from about 65% of the financed amount for a 1-year lease down to ~28% for 5 years), and GST applies again when you pay it out to take ownership. Many seller calculators leave the residual out entirely, which makes a lease look far cheaper than it is. Ours always shows it.
2. “Tax saved” is not “money saved”
The headline “you save $X” you see elsewhere is almost always a tax reduction — sometimes even your whole package multiplied by your marginal rate. But you spent both pre-tax and post-tax (ECM) dollars, plus interest and fees, to get there. The only number that means anything is the difference in total net cost between leasing and the realistic alternative — the same car on a car loan. That is what we lead with.
3. Electric vehicles and the FBT exemption
Eligible EVs (under the luxury-car-tax fuel-efficient threshold) are exempt from Fringe Benefits Tax, which means the whole package can be salary-sacrificed pre-tax — a big lever. But plug-in hybrids lost eligibility for new arrangements from 1 April 2025, and the EV exemption itself is under a government review and could be wound back for future arrangements. Toggle it on to see the difference; we flag the risk.
4. The things it quietly costs you
A novated lease is a committed liability that reduces your home-loan borrowing power, and even a fully-packaged or FBT-exempt car generates a Reportable Fringe Benefits Amount that counts toward HELP/HECS repayments, the Medicare Levy Surcharge, and means-tested benefits. For lower earners a non-EV lease can even leave you worse off.
Frequently asked questions
Is a novated lease worth it?
It depends on your income, the car, and the alternative. It tends to win for higher earners and for eligible EVs (thanks to the FBT exemption), and for people who would otherwise buy a similar new car anyway. It rarely beats keeping a paid-off car in pure cash terms. Use the calculator with your real numbers rather than trusting a headline.
Why is your “saving” smaller than the dealer’s?
Because we subtract the residual you still owe, the finance interest, the admin fee, and the GST on the balloon — and we compare against buying the same car, not against setting fire to your money. Seller calculators typically show the gross tax reduction only.
What is the Employee Contribution Method (ECM)?
For a non-exempt car, you pay part of the cost from post-tax salary to bring the Fringe Benefits Tax to nil. Those post-tax dollars are a real cost — they are not a saving — so we show the pre-tax and post-tax split explicitly.
Are these numbers financial advice?
No. They are estimates based on the assumptions you enter and FY2025-26 rates as at 2025-07-01. Tax settings change, and your resale value, interest rate and running costs heavily affect the result. Confirm with the ATO, your employer’s salary-packaging provider, and a licensed adviser before committing.