A novated lease on an EV is a way to finance your car through a three-way agreement between you as an employee, your employer and a novated lease provider.
It allows you to finance a vehicle entirely for personal use as part of your salary — known as salary packaging. This helps you save on income tax.
That's in addition to the up-front GST discount you'll get on the vehicle purchase and all your packaged running costs through your novated lease. On a $60,000 EV, the up-front GST saving alone would be $5,454.
An EV novated lease works in the same way but you enjoy some extra advantages.
Currently, novated leases on EVs and PHEVs valued below $89,332 are exempt from fringe benefits tax, thanks to an Australian Government incentive.
This means you can pay for 100% of your car costs (the car itself, plus all running costs) using pre-tax salary deductions.
This is an even better deal than what you can get with a standard novated lease. It reduces the cost of paying for an electric vehicle by thousands of dollars per year. It's cheaper than paying for the car with cash.
The employer agrees to make regular, automated payroll deductions from the employee’s salary to the leasing company.
The employee agrees to have those salary deductions in exchange for the use of the vehicle. The vehicle can be used for business purposes, or entirely for personal use.
Procure the vehicle, establish the lease and manage the administrative, contractual and compliance aspects of the transaction.
Novated leases are a ‘win-win’ for both employees and employers. Employees benefit from ex-GST pricing on a car for personal use, and can reduce their income tax bill. Employers can offer novated leasing as an incentive, at no cost to the business.
In summary, the best benefits of a novated lease in Australia include:
How much could you save on an EV with a novated lease?
The table below shows estimated novated lease savings on some of Australia's top-selling EVs. These examples are based on a driver in NSW with an annual pre-tax salary of $120,000 travelling 15,000km/year. See your own estimated savings by getting a fast, personalised quote.
GET A QUOTEGET A QUOTETesla Model Y (RWD) | |
---|---|
Regular driveaway price | $68,314 |
Upfront novated lease GST saving | -$6,109 |
Total weekly cost | $220 |
Runnings costs included in weekly cost (with GST saving) |
|
Total tax saving during lease | $39,198 |
Tesla Model 3 (RWD) | |
Regular driveaway price | $64,814 |
Upfront novated lease GST saving | -$5,791 |
Total weekly cost | $212 |
Runnings costs included in weekly cost (with GST saving) |
|
Total tax saving during lease | $37,552 |
BYD Atto 3 (Extended Range) | |
Regular driveaway price | $52,113 |
Upfront novated lease GST saving | -$4,637 |
Total weekly cost | $180 |
Runnings costs included in weekly cost (with GST saving) |
|
Total tax saving during lease | $32,133 |
MG4 (Essence) | |
Regular driveaway price | $49,709 |
Upfront novated lease GST saving | -$4,419 |
Total weekly cost | $172 |
Runnings costs included in weekly cost (with GST saving) |
|
Total tax saving during lease | $30,794 |
Regular driveaway price | $85,189 |
Upfront novated lease GST saving | -$6,191 |
Total weekly cost | $268 |
Runnings costs included in weekly cost (with GST saving) |
|
Total tax saving during lease | $47,588 |
Cupra Born (5-Seat Hatch) | |
Regular driveaway price | $64,490 |
Upfront novated lease GST saving | -$5,762 |
Total weekly cost | $214 |
Runnings costs included in weekly cost (with GST saving) |
|
Total tax saving during lease | $37,890 |
Mitsubishi Outlander (Exceed PHEV 5+2 Seat) | |
Regular driveaway price | $74,910 |
Upfront novated lease GST saving | -$6,191 |
Total weekly cost | $241 |
Runnings costs included in weekly cost (with GST saving) |
|
Total tax saving during lease | $42,892 |
Kia EV6 (GT-Line AWD) | |
Regular driveaway price | $93,995 |
Upfront novated lease GST saving | -$6,191 |
Total weekly cost | $292 |
Runnings costs included in weekly cost (with GST saving) |
|
Total tax saving during lease | $51,646 |
MG ZS EV (Essence) | |
Regular driveaway price | $49,709 |
Upfront novated lease GST saving | -$4,419 |
Total weekly cost | $174 |
Runnings costs included in weekly cost (with GST saving) |
|
Total tax saving during lease | $31,114 |
Kia Niro (EV GT-Line) | |
Regular driveaway price | $75,395 |
Upfront novated lease GST saving | -$6,191 |
Total weekly cost | $241 |
Runnings costs included in weekly cost (with GST saving) |
|
Total tax saving during lease | $42,580 |
BMW iX1 (XDrive30 M Sport) | |
Regular driveaway price | $91,930 |
Upfront novated lease GST saving | -$6,191 |
Total weekly cost | $294 |
Runnings costs included in weekly cost (with GST saving) |
|
Total tax saving during lease | $52,257 |
Mazda CX-60 (GT PHEV) | |
Regular driveaway price | $87,391 |
Upfront novated lease GST saving | -$6,191 |
Total weekly cost | $280 |
Runnings costs included in weekly cost (with GST saving) |
|
Total tax saving during lease | $49,621 |
Regular driveaway price | Upfront novated lease GST saving | Total weekly cost | Runnings costs included in weekly cost (with GST saving) | Total tax saving during lease | |
---|---|---|---|---|---|
Tesla Model Y (RWD) | $68,314 | -$6,109 | $220 |
| $39,198 |
Tesla Model 3 (RWD) | $64,814 | -$5,791 | $212 |
| $37,552 |
BYD Atto 3 (Extended Range) | $52,113 | -$4,637 | $180 |
| $32,133 |
MG4 (Essence) | $49,709 | -$4,419 | $172 |
| $30,794 |
$85,189 | -$6,191 | $268 |
| $47,588 | |
Cupra Born (5-Seat Hatch) | $64,490 | -$5,762 | $214 |
| $37,890 |
Mitsubishi Outlander (Exceed PHEV 5+2 Seat) | $74,910 | -$6,191 | $241 |
| $42,892 |
Kia EV6 (GT-Line AWD) | $93,995 | -$6,191 | $292 |
| $51,646 |
MG ZS EV (Essence) | $49,709 | -$4,419 | $174 |
| $31,114 |
Kia Niro (EV GT-Line) | $75,395 | -$6,191 | $241 |
| $42,580 |
BMW iX1 (XDrive30 M Sport) | $91,930 | -$6,191 | $294 |
| $52,257 |
Mazda CX-60 (GT PHEV) | $87,391 | -$6,191 | $280 |
| $49,621 |
Shopping around for the best novated lease can save you thousands of dollars in interest and fees
To get the best novated lease deal, make sure you choose a leasing company that passes on their bulk-buying car discounts. This means you will also get a discount off the regular car price and can save more money on your vehicle purchase.
You have the choice of fully maintained and non-maintained. The key difference is that, with a fully maintained novated lease, you package all the running costs of the vehicle into your pre-tax payment, which further saves you money. This is by far the most popular choice.
The fully maintained option includes:
These costs will be estimated based on the number of kilometres you intend to drive each year. If your circumstances change, these estimates can be updated throughout the term of your lease. Speak to your employer to determine the type of novated lease they offer.
Yes, you can add accessories to your EV with a novated lease. These can be bundled in to the purchase price of the new car with a GST discount.
Fully Maintained | Self-managed (Non-maintained) |
---|---|
Obtained from novated leasing companies | Obtained directly from banks |
Includes all maintenance and running cost expenses | Only provides funding for the vehicle itself, and no additional running costs |
Additional vehicle add-ons and services can be purchased GST-free when acquiring the vehicle | Only of value to the employee if the employer is paying for running costs on the vehicle |
A novated lease and a car both provide immediate full ownership of the vehicle, and there are no restrictions on how the vehicle is used for personal or business purposes.
Feature | Novated Lease | Car Loan |
---|---|---|
Amount | $5,000 - $150,000 | $5,000 - $100,000 |
Terms | 6 months - 5 years | 2 - 7 years |
Fees | Low | Medium |
Interest Rates | From 7.00% | From 7.00% |
Purpose | Salary packaging a vehicle | Financing a personal vehicle without salary packaging |
The main difference between a novated lease and a car loan is in how the vehicle is financed:
A fully maintained novated lease is only available through novated lease providers, and includes both the vehicle finance cost and its related operating expenditure in the total repayments and paid by the employer from the employee’s salary.
A car loan is available from banks, dealerships, car loan lenders, and vehicle brokers. Some lenders offer discounted 'green loans' for EVs, but these have very strict eligibility criteria.
A car loan can include on-road costs and insurance, but the running costs are entirely the borrower’s responsibility, and are not included in the loan amount. Payments are made directly to the financier from the borrower.
Whilst the vast majority of novated leases are for new EVs, it's not actually a requirement. You can buy any used car. However, if you want to take advantage of the FBT exemption the vehicle needs to have been first registered after July 2022.
To get the GST saving on the vehicle purchase price of a used EV, you'll need to buy it from a dealer.
By using a novated lease, an employee can acquire a vehicle without paying GST (Goods and Services Tax) on it. As the leasing company buys the vehicle to lease, the borrower will not pay GST on the initial purchase price of the vehicle.
Any GST included in the lease charges can be claimed by the employer, which is then passed on as savings to the employee leasing the vehicle.
The saving is 10% of the vehicle's purchase price up to a maximum saving of $6,191.
The short answer is no. There used to be a requirement, but that was over 10 years ago. It doesn't matter whether you drive 10,000 km or 30,000 km or whether you drive for personal or business use.
This is one of the key reasons that makes a novated lease totally worth it.
You have a few options available at the end of your novated lease term:
Pay any residual/balloon amount and gain full ownership of the vehicle
Sell the vehicle and claim any profit from the vehicle (above the residual) tax-free
Refinance the vehicle
In some cases, you may be able to return the vehicle to the novated leasing company without paying any residual amount
Balloon or ‘residual’ amounts are pre-determined lump-sum repayments, which are paid at the end of the novated lease term. Residual payments reduce regular repayments by including a higher final payment. Learn more here.
The residual amount will vary, and shorter terms will have higher residuals attached. If you are using the car to travel extensively (35,000 km or more per year) you can usually opt for a lower residual. Speak to your leasing provider about this.
At the end of your novated lease, you will need to either pay the residual amount owing, or consider refinancing the vehicle under a new agreement.
Interest rates on a novated lease are generally applied between 7% and 12%. The interest rate will be influenced by:
Lease Length | Residual Value Percentages |
---|---|
12 Month Lease | 65.63% |
24 Month Lease | 56.25% |
36 Month Lease | 46.88% |
48 Month Lease | 37.5% |
60 Month Lease | 28.13% |
In Australia, there are around 40-50 novated leasing companies that can work with you and your employer to establish your novated lease. You can qualify if you are:
You can essentially have any EV that best suits you and your lifestyle — from SUVs to hatches and sports cars.
Used cars are also possible but cannot be more than 12 years old at the end of the term (not currently an issue with EVs).
There are only two restrictions to consider:
Getting a novated lease is still a finance contract and you will be required to be credit checked. This will show the lender any bad credit history. The positive with novated leasing though is that you still have a high likelihood of being approved because it's your employer making the repayments to the financier.
If you are self-employed — i.e. are not paid a salary by an employee or receiving a salary through your own company — you will need to look at alternative forms of vehicle finance, such as a Chattel Mortgage for business vehicles, or Low-Doc Car Loan.
The lowest salary you need for a novated lease will depend on the cost of the vehicle being novated. Novated leasing approval is dependent on your capacity as a borrower, and with a minimum vehicle price of $15,000 on a 5-year term with a 25% balloon, even employees on a modest salary can take advantage of novated lease benefits.
If you leave your job during the term of your novated lease, you will still be responsible for finance payments on the vehicle. The lease will be “de-novated”, the running costs are removed from the agreement and repayments will continue much the same way as a standard car loan.
When you are employed again — provided your new employer agrees to salary packaging the vehicle — the lease can be re-novated, and revert back to its initial state including running costs.
If your new employer accepts novated leasing, then you will simply be able to transfer your lease to them. There is a bit of paperwork involved, but largely this is a seamless process.
Get a quick novated lease quote
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