In our novated lease residual value guide:
It represents the remaining (residual) value of the vehicle at the end of the lease term.
The Australian Taxation Office (ATO) sets the minimum residual values usually allowed for different lease terms.
These apply to new and used car novated leases.
The ATO guidelines on residual values are based on a minimum percentage of the vehicle cost (e.g. amount you purchased the car for) over the lease term.
The table below shows the ATO’s minimum values.
A lower minimum may be allowed if the value of the asset is likely to be lower than the calculated residual based on a fair estimate.
For instance, if you are adding a lot of mileage to the car, you may want a lower residual. This is best discussed when taking out your novated lease.
|Lease Length||Residual Value Percentages|
12 Month Lease
24 Month Lease
36 Month Lease
48 Month Lease
60 Month Lease
Instead you make a large one-off payment at the end of the lease term.
You can find the residual amount of your novated lease by multiplying the cost of the vehicle by the applicable percentage according to your lease term. The residual should also be shown on the quote provided to you by a novated lease company.
You can see in the table below how the residual value will be calculated according to the length of your novated lease deal.
You’ll have some options at the end of your novated lease:
This remaining balance is your residual amount. Understanding how it is calculated and how it works can save you money and even make a profit.
See, if you choose a vehicle with a strong resale value, you'll most likely be able to sell your car at the end of the lease for a higher amount than your residual payment. In this instance, any difference is yours to keep as tax-free profit. It's one of several advantages of a novated lease.
The residual payment on a novated lease is similar to a car loan balloon payment but there are differences between the two options.
This comparison shows the potential savings a novated lease offers over a 5-year term, compared to financing a vehicle with a car loan or paying for it outright with cash.
The comparison includes car running costs for five years (based on 15,000km driven annually).
The example is based on a purchase of a 2023 Tesla Model 3 RWD, with a purchase price of $66,100 in NSW (with a novated lease residual value of $18,967). The comparison assumes an annual pre-tax salary of $120,000 and incorporates the fringe benefits tax exemption for eligible electric vehicles with a novated lease.
Novated lease guides and resources
Find out more about the possible savings, benefits and things to watch out for, plus your range of options with a novated lease in Australia.