Is a novated lease worth it?
A novated lease is most likely to be worth it in 2026-27 when the car is an FBT-exempt electric car and your marginal tax rate is 30% or more. That conclusion comes from our own illustrative model (the worked examples below), not from the ATO; the ATO supplies only the tax rates, FBT rules and EV exemption it uses. For petrol and diesel cars the 20% FBT statutory formula pushes part of the cost into post-tax pay, so the saving shrinks and fees or interest can wipe it out.
General information only, not financial or tax advice. It depends on your circumstances; run your own numbers in the novated lease calculator. Background: how a novated lease works.
Does your salary change the answer?
Yes. This table runs the same 3-year lease at an example 8% rate across four salaries. "Vs cash" is the estimated difference over the term including the residual; positive means the lease costs less. The site's calculator code produces every figure.
| Salary | BEV $60,000: tax saved / yr | BEV: vs cash over term | Petrol $40,000: tax saved / yr | Petrol: vs cash over term |
|---|---|---|---|---|
| $40,000 | $3,270 | -$1,024 | $933 | -$4,423 |
| $80,000 | $6,155 | $7,632 | $1,757 | -$1,952 |
| $150,000 | $7,205 | $10,782 | $2,141 | -$799 |
| $200,000 | $8,302 | $14,071 | $2,580 | $519 |
Our model ignores lessor fees and interest you could earn on cash, so treat it as a starting point. Every step is on the methodology page.
Pros: when does a novated lease look better?
- The car is an eligible EV. With the FBT exemption the whole package can come from pre-tax salary. ATO source. See EV FBT exemption.
- Your marginal tax rate is higher. The 2026-27 rates are 30% from $45,001, 37% from $135,001, 45% from $190,001, plus 2% Medicare levy. ATO source
- Running costs are packaged too, and for an exempt EV they also come from pre-tax pay.
- You would buy a new car anyway and keep it for the full term.
Cons: what are the downsides of a novated lease?
- Petrol and diesel cars carry FBT. The taxable value is 20% of the base value each year. The employee contribution method removes the FBT, but those contributions come from post-tax pay. ATO source. See FBT on a novated lease.
- Your taxable income is low. At or below $18,200 there is no income tax to save.
- Provider fees and interest rates vary, so check them with each provider. Test a real quote with the quote checker.
- You must pay or refinance the residual at the end. Residual values.
- If you change jobs, what happens when employment ends depends on your agreement (ask your lessor).
- An exempt EV is still a reportable fringe benefit (ATO). Whether this affects the Medicare levy surcharge, HELP repayments, child support or Centrelink tests is not yet verified against an official source; check before you sign.
Is a novated lease a trap?
It is a finance product with a tax effect and is not a trap in itself, though the numbers are easy to misread. Three checks catch most problems: compare the total over the term including the residual (not just the fortnightly figure), find the interest rate built into the quote, and confirm what happens if you leave your job. Our comparisons: vs a car loan and vs buying outright.
Will the EV rules change?
Announced changes from 1 April 2027 (NOT YET LAW) would keep the full exemption for EVs at or below $75,000 until 1 April 2029, give EVs over $75,000 but below the LCT threshold a 25% discount (15% statutory rate), and from 1 April 2029 give all eligible EVs the 25% discount. Existing leases are said not to be impacted. ATO source
Frequently asked questions
What is the catch on a novated lease?
You pay interest and any lessor fees, you owe a residual lump sum at the end, and for cars that are not FBT exempt part of the package comes from post-tax pay. For exempt EVs the benefit is still reportable on your income statement.
At what salary is a novated lease worth it?
There is no single figure. The saving depends on your marginal tax rate (15%, 30%, 37% or 45% in 2026-27, plus 2% Medicare levy), the car type, the interest rate and fees. At or below $18,200 there is no income tax to save. Use the calculator with your own numbers.
Do you actually save money with a novated lease?
In our model an eligible EV usually does: a $60,000 BEV on a $100,000 salary costs $7,632 less than paying cash over 3 years. A $40,000 petrol car costs $1,952 more. These are estimates at an example 8% rate.
Is a longer or shorter novated lease better?
A longer term lowers the residual percentage (28.13% at 5 years vs 65.63% at 1 year under the ATO table) but means more interest. Compare terms in the calculator.
By . Published by Abdisalan Awale, ABN 64 886 470 398 (about us). Last reviewed 17 Oct 2026 against the sources on our sources page. Not yet reviewed by a qualified third party. How we calculate: methodology.