The Finance Algorithm

Novated Lease Calculator

Calculate tax savings from salary sacrificing a car through novated lease

Updated October 2026Built and checked by MaverickHow it's calculatedReport an error

Your numbers

Updates as you type
$
$90k

Your salary before tax

$
$45k
4
15,000

Battery electric cars priced up to the $91,661 luxury car tax threshold are exempt from FBT

%

From your novated lease quote

$
$3k
$
$2k
$
$2k

The button asks our AI to explain these figures in words.

Novated lease: tax & net cost

Annual tax saving

$1,801

at 32% marginal rate

Total tax saved

$7,202

across full lease term

Net annual cost

$12,826

after tax savings

Residual balloon

$15,341

payable at end of lease

Buying outright vs novated lease

Includes the car, running costs, the residual and the tax saved, with FBT removed by the employee contribution method.

$71,000Cash purchase$66,646Novated lease

Where each lease dollar goes

Lease payments and running costs are packaged ex-GST. The ECM part is paid from after-tax pay; the residual is paid at the end to keep the car.

$109,847total outlay
Lease payments31.7%
Running costs21.5%
ECM (post-tax)32.8%
Residual14.0%
Worth it if
Novated lease saves you $4,354 vs cash purchase
The maths swings on your marginal tax rate (32% here) and the residual payment ($15,341) you'll owe at the end. Get a written quote from your packaging provider before signing: fees vary by provider.

How it works

A novated lease lets you pay for a car and its running costs from your salary through your employer. The employer claims GST credits on the car and running costs, and the part paid from pre-tax salary cuts your income tax. For petrol, diesel and hybrid cars, fringe benefits tax is usually removed by paying 20% of the car's cost a year from after-tax pay (the employee contribution method). Electric cars under the luxury car tax threshold are exempt from FBT, so the whole package can come from pre-tax pay. This calculator compares the total with buying the car outright.

  1. 1Enter your annual gross salary.
  2. 2Add the car's drive-away price and whether it's electric.
  3. 3Choose the lease term and the interest rate on your quote.
  4. 4Enter your yearly fuel or charging, insurance and servicing costs.
  5. 5See the tax saving, the net cost and the residual to pay at the end.

The figures today

As of 7 November 2026, the lowest car loan rate from a bank or lender is 5.74%, from Westpac's Car Loan, while the typical best across 42 institutions is 6.99%. The lowest carmaker finance rate is 2.70%, from Chery Motor Finance's Chery 4.46% EV Comparison Rate Offer, while the typical best across 12 institutions is 4.99%.

Car loan rates

Worked examples

Petrol Car on $85,000

$85,000 salary, a $40,000 petrol car on a 4-year lease at 8%, 15,000 km a year, with $3,000 of fuel, $1,500 of insurance and $2,000 of servicing a year.

Annual gross salary
$85,000
Vehicle price
$40,000
Vehicle type
Petrol, diesel or hybrid
Lease term (years)
4
Lease interest rate
8%
Kilometres a year
15,000
Estimated annual fuel
$3,000
Annual insurance
$1,500
Annual servicing/rego
$2,000

The package costs $13,658 a year: $8,000 is paid from after-tax pay to remove FBT and $5,658 from pre-tax pay, saving $1,811 of tax and Medicare levy a year. Over 4 years, plus the $13,636 residual, the car costs $61,026 against $66,000 to buy it outright and pay the running costs - about $4,974 less.

Electric Car on $85,000

The same, but a $55,000 electric car with $700 of charging instead of fuel.

Annual gross salary
$85,000
Vehicle price
$55,000
Vehicle type
Electric
Lease term (years)
4
Lease interest rate
8%
Kilometres a year
15,000
Estimated annual fuel
$700
Annual insurance
$1,500
Annual servicing/rego
$2,000

With no FBT, all $14,473 a year comes from pre-tax pay, saving $4,631 a year. Including the $18,750 residual, the total is $58,117 against $71,800 to buy outright - about $13,683 less.

Questions people ask

Who benefits most from a novated lease?
The higher your marginal tax rate, the more each pre-tax dollar saves, and electric cars under the threshold save the most because none of the package goes through the employee contribution method. Compare the total cost with buying - fees, the interest rate and the residual can outweigh the tax saving.
What happens if I leave my job?
The lease can usually move to a new employer that offers novated leasing; otherwise it reverts to you personally and you make the payments from after-tax pay, or pay it out. Check the terms before you sign.
Are electric cars better for a novated lease?
Battery electric cars under the fuel-efficient luxury car tax threshold ($91,661 for 2026-27) are exempt from FBT, so the whole package can be paid pre-tax. The Budget announced that for new arrangements from 1 April 2027 the full exemption is limited to cars costing $75,000 or less, with a 25% discount above that.

The terms, in plain English

Novated Lease
A three-way agreement between employee, employer, and finance company for salary packaging a car.
Salary Sacrifice
Paying for benefits from pre-tax salary, reducing taxable income.
Fringe Benefits Tax (FBT)
Tax an employer pays on non-cash benefits to employees. For a packaged car it's usually removed by the employee contribution method.
ECM (Employee Contribution Method)
Paying part of the car's costs from after-tax pay, equal to its taxable value, so the employer has no FBT to pay.

Official sources

Lease vs Buy Calculator

Compare with standard leasing

EV Loan Calculator

EVs have FBT exemption

Total Cost of Ownership

Compare full ownership cost