Written by Keep on top of your vehicle costs with Savvy’s leasing calculator
Leasing a vehicle may be a cost-effective option for you or your business, but it’s important to understand all of the potential charges involved. This vehicle lease calculator will show you your monthly repayments, as well as the total interest you’ll pay, to help you keep on top of your vehicle costs.
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How do I use Savvy’s leasing calculator?
To use the leasing calculator, enter in the purchase price of your car or equipment and the residual value agreed between you and your leasing company. Next, enter the leasing term, the interest rate and by what method the payments are made: either in advance (payment is made before the month of leasing) or in arrears (payment is made after the month of leasing).
Once you’ve filled all this out, you’ll be able to see how much your monthly repayment, total interest payable and total overall cost are. You can use the calculator to play around with different numbers until you arrive at a monthly repayment and term that you’re comfortable with and use this information when you’re negotiating your agreement with your lease provider and/or employer.
What leases can I use this calculator for?
Novated leases
A novated lease is a three-way arrangement between you, your employer and a leasing company (lessor). The lessor buys your car and provides it to your employer, who then gives it to you. The payments for the lease are deducted from your pre-tax salary and are passed directly to the lessor, which is known as salary sacrificing. At the end of the lease, you’ll have the option to buy the car, sell it, trade it in or refinance the residual and extend your lease.
The major benefit of novated leasing is that it reduces your taxable income, given that your payments are made pre-tax, rather than post-tax. The GST on the purchase of the car is also claimable by your lessor, who can pass the savings onto you. Also, you can use the car however you like, for private or commercial purposes.
Finance leases
Finance leases are flexible agreements available to businesses for a range of assets, from cars to specialist commercial vehicles like trucks, forklifts and excavators to equipment. As this is an agreement between your business and the lessor, you’ll make payments directly to them, rather than salary sacrificing.
You’ll have the same options for dealing with the residual at the end of your lease term, giving businesses flexibility in how to manage it. You can also decide whether to include on-road costs like registration, insurance and servicing in your repayments (fully-maintained) or keep them separate (non-maintained).
Operating lease
The key difference between operating leases and the rest is that they come without residual payments, meaning you’ll simply hand your vehicle back at the end of your term. This makes them suitable for businesses wanting a shorter-term lease, after which they can replace or update their vehicles or equipment more often.
These leases are generally only available for road vehicles, rather than specialised commercial equipment. Like finance leases, though, you can decide between fully-maintained and non-maintained agreements.
What factors impact the cost of my lease?
There’s a range of variables that’ll impact your lease’s overall cost, including the following:
- The cost of the asset
- The leasing term
- Your lessor’s interest rate
- Your lessor’s fees
- The size of your residual (if applicable)
The following tables show how some of these factors can impact how much you’ll be paying in interest overall:
Asset cost and interest rate
| Purchase price | 7.50% p.a. | 8.50% p.a. | 9.50% p.a. |
|---|---|---|---|
| $20,000 | $5,018 | $5,712 | $6,412 |
| $30,000 | $7,526 | $8,567 | $9,617 |
| $50,000 | $12,544 | $14,278 | $16,028 |
| $75,000 | $18,815 | $21,418 | $24,043 |
Calculations based on five-year lease terms with monthly payments made in arrears and residual values worth 28.13% of the purchase price.
Leasing term and size of residual
| Purchase price | Lease term | Residual | Interest rate | Monthly payment | Total interest |
|---|---|---|---|---|---|
| $30,000 | One year | $19,689 | 7.50% p.a. | $1,018 | $1,901 |
| $30,000 | Two years | $16,875 | 7.50% p.a. | $697 | $3,582 |
| $30,000 | Three years | $14,064 | 7.50% p.a. | $584 | $5,074 |
| $30,000 | Four years | $11,250 | 7.50% p.a. | $524 | $6,387 |
| $30,000 | Five years | $8,439 | 7.50% p.a. | $485 | $7,526 |
Calculations based on leases with monthly payments made in arrears and residual values worth the minimum required value as set by the ATO.
What are the benefits of novated car leasing?
Some of the benefits of novated leasing include:
- You pay for your vehicle with pre-tax income, reducing your overall income tax bill. Use the novated car lease calculator to show you how much in income tax this will save you paying.
- You save on paying GST on your new vehicle, making the car itself cheaper than paying cash.
- You can benefit from fleet pricing for servicing and replacement parts, which all form part of the novated lease plan.
- At the end of the lease period, you can pay the residual amount and upgrade to a brand-new car with a new lease agreement.
What part of my lease can I claim on tax?
The answer to this depends on the type of lease you’re taking out. For finance and operating leases, you can claim up to 100% of your payment as a business expense, as well as any other eligible on-road costs not included in your payments.
However, only the business portion of your usage is claimable. For example, if you were leasing a car for your business but also used it on the weekends, which added up to 30% of the time, you’d only be able to claim a maximum of 70% of your lease payment.
Meanwhile, for novated leases, the tax benefit comes from the reduced income tax and claimable GST by your lessor. You’d only be able to claim part of your payment if the car was used partially for business purposes. Speak with your accountant if you’re unsure what you can and can’t claim.
Is it better to take out a novated lease or buy a car with a loan?
That will depend on your overall financial situation. A novated lease will reduce your taxable income and save you from paying the cost of GST on your new car. Initially, repayments may be cheaper than if you have a car loan, but the lease may cost you more overall once you take the cost of the balloon payment into account (though you’ll have to weigh this up against the tax savings).
On the other hand, if you buy a car with a car loan, you’ll own the car from the moment you buy it. You’ll also have more choice about negotiating the final balloon payment to adjust the loan cost to make it affordable to your budget, although balloons are generally only attached to commercial car loans. You can see how much a car loan will cost you using our car loan repayment calculator.
Get a free, no-obligation quote with Savvy today and we’ll be able to talk you through your options for either buying or leasing your car.
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Tips for reducing your monthly lease payments
Common leasing questions answered
If you have an accident and damage your leased car, your comprehensive car insurance may cover the cost of repair or replacement. It’s important to contact your leasing company as soon as possible after the accident. However, you will still have to pay the lease on your car while the repairs or replacement is being organised, even if no replacement is sourced or if it’s written off.
Yes – all financial agreements you sign are visible on your credit report. If you make all of your lease payments on time, this could have a positive effect on your personal or business credit score.
Yes – insurance may be higher if you lease a vehicle. You could pay between 5% and 10% more for the same car insurance if your vehicle is leased. You may not have a choice when it comes to insuring your leased vehicle, though, as some leasing companies will require you to use their insurance company, meaning you won’t be able to compare different policies to help you save.
It’s worth asking your leasing company about their insurance requirements and, if you do have a choice, comparing vehicle insurance to find the cheapest policy for your needs. You can do just that through Savvy!
It will certainly help to have a higher credit score when you apply to lease a car, as this could give you access to more favourable terms and lower interest and fees. However, there may still be options available for businesses who’ve struggled with their credit in the past. You can speak with one of our experienced consultants to find out what options may be available to you or your business.
In most cases, you should be able to transfer your novated lease from one place of employment to the next. However, if there’s a gap between your former job and your next one or your new place of work doesn’t offer novated leasing, your lease will be de-novated. This means payments will have to be made by you out of post-tax income, losing the tax benefits of salary sacrificing.
The ATO has set minimum requirements for residual values on car leases based on different term lengths, which are as follows:
- 12-month term: 65.63%
- 24-month term: 56.25%
- 36-month term: 46.88%
- 48-month term: 37.5%
- 60-month term: 28.13%
