Pre-tax versus post-tax
With a car loan you earn your salary, pay income tax on all of it, and then pay the loan from what is left. With a novated lease, part of the cost comes out before tax is calculated, so your taxable income drops.
Where a novated lease wins
- Paid from pre-tax salary, lowering your taxable income
- You save the GST on the purchase price
- An eligible EV is FBT exempt, which a loan cannot match
- Fuel or charging, insurance, rego, servicing and tyres are bundled into one payment
An honest note: FBT exempt means no fringe benefits tax is payable, but the benefit is still reported on your income statement. That reported amount can affect income-tested things like HECS or HELP repayments, the Medicare levy surcharge, and family payments. Our calculator and team will always show you the full picture.
Where a car loan can suit
A loan can make sense if your employer does not offer salary packaging, if your taxable income is very low, or if you want to own the car outright with no residual at the end. We would rather you knew that than signed up regardless.
The honest comparison
The only way to compare them properly is on your numbers. The calculator shows the novated-lease weekly cost with every fee and the true effective rate, so you can hold it against a loan quote and decide with eyes open.
Common questions
Is a novated lease cheaper than a car loan?
For many people yes, because of the pre-tax deduction and the GST saving, and especially for an FBT-exempt EV. But it depends on your income and the car, so compare the real figures.
Do you own the car with a novated lease?
Not until you pay the residual at the end of the term (or refinance it). With a car loan you own it once the loan is paid. It is a genuine difference worth weighing.
What happens if I change jobs?
The lease travels with you: you take it to your new employer, or cover the payments yourself in between. It is fully novated, so the obligations sit with you.