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A novated lease is a three-way arrangement between you, your employer and a finance company. You choose the car; your employer takes the lease repayments and running costs out of your salary and pays them to the financier. The appeal is tax: because much of the cost comes out of your pre-tax salary, you can lower your taxable income — but the picture is shaped by Fringe Benefits Tax (FBT), which exists to stop that being a free ride.
Providing a car through salary packaging is a fringe benefit, so FBT applies. Most packages use the Employee Contribution Method, where you pay part of the cost from post-tax salary to cancel out the FBT liability, keeping the pre-tax benefit on the rest. The maths only works in your favour once the tax saved on the pre-tax portion outweighs the lease's fees and interest, which is why a calculator matters.
Eligible electric and hydrogen vehicles priced under the luxury car tax threshold for fuel-efficient cars currently attract a full FBT exemption, which makes novated leasing an EV unusually tax-effective — you keep the pre-tax benefit without needing post-tax contributions to offset FBT. Note this is tightening: from 1 April 2027 the concession narrows for cars over $75,000, and a broader change to a 25% discount applies from 2029, so the current window is genuinely generous.
At the end of the lease there's a residual (balloon) value — a lump sum set by ATO guidelines that you must pay, refinance or clear by selling the car. Package quotes also bundle in running costs (fuel or charging, insurance, servicing, tyres, registration), so compare the total cost, not just the headline weekly figure, and check what happens if you change jobs, since the lease travels with you.
What happens if I leave my job? The lease is "novated" back to you — you either keep paying it personally or novate it to a new employer. The car and the debt stay with you.
Is a novated lease always cheaper? No. For lower incomes, short-hold periods, or cheap cars, the fees and interest can outweigh the tax benefit. EVs under the threshold currently tilt the maths strongly in favour.
Do I own the car? Not until you pay the residual at the end. During the lease the financier owns it and you have use of it.
This calculator uses current published rates from Australian government and regulator sources. The result is an estimate for general guidance — it does not constitute personal financial advice. For decisions about your circumstances, consult a registered financial adviser, tax agent, or other professional. See editorial standards for how DecisionLab sources and updates its calculator data.