05 September 2025
Fact Checked

Novated lease
Australia

Choosing a novated lease for your next vehicle means you can reap the tax rewards while driving the car you love.

*No obligation. It won't affect your credit score.

Novated Lease Australia

How to apply for your novated lease with Savvy

Applying for a novated lease with us is straightforward.

1

Fill out our online quote

Let us know where you’re at and how much you’re looking to package.

2

Speak with your broker

We’ll give you a call to chat about your available leasing options.

3

We’ll handle the rest

Your broker will take care of your application and lease paperwork.

Easy as 1. 2. 3. Get approved today!
Man preparing to drive his car

Novated leases are growing in popularity in Australia as a tax-friendly way of buying a car. According to the National Automotive Leasing and Salary Packaging Association (NALSPA), there are around 350,000 novated leases in Australia as of September 2024.

It’s easy to see why: spacing out the cost of your purchase and reducing your taxable income in the process sounds pretty attractive. Find out more about how they work and whether they’re right for you before you decide on your next car purchase.

What is a novated lease?

A novated lease is a salary sacrificing or salary packaging agreement between you, your employer and a novated lease provider. Here’s a quick rundown of how it works:

  1. Your novated lease provider purchases your car and leases it to your employer, who then gives you access even if it’s only for private use
  2. Your employer covers your lease obligations by deducting them from your pre-tax salary
  3. Your payments are made until the end of your lease term (up to five years), at which point you can decide between several different options

The main reason why most people choose novated leases is what happens in step #2: pre-tax salary deductions. By taking the payment from your payslip before it’s sent to you, your taxable income is reduced, which in turn lowers the tax you’re required to pay. As an added bonus, you can also save on GST, as this can be claimed on the car purchase by your leasing company.

All novated leases come with a residual value or payment. This is a lump sum that’s intended to represent the value of your car at the conclusion of the lease. The Australian Taxation Office (ATO) has set minimum required residual values for each lease term length, which are as follows:

Lease term Minimum residual value %
12 months 65.63%
24 months 56.25%
36 months 46.88%
48 months 37.50%
60 months 28.13%

What are the different types of novated lease?

There are two types of novated lease on offer in Australia: fully maintained and non-maintained novated leases. Here’s how they differ from one another:

  Fully maintained Non-maintained
On-road costs included Yes No
Included in payment
  • Leasing costs
  • Interest
  • Comprehensive and CTP insurance
  • Vehicle registration
  • Roadside assistance
  • Petrol or charging costs
  • Servicing and repair costs
  • Tyres
  • Leasing costs
  • Interest
Total payment cost Higher Lower

The main benefit of fully maintained leases is that the cost of all the included extras comes out of your pre-tax salary, rather than post-tax. This means they can save you more money, as well as have GST claimable on these costs. It also saves time, as you don’t have to organise them yourself or access your savings.

In contrast, non-maintained novated lease payments only include the cost of your vehicle and the fees and interest associated with your lease. This means you’re responsible for arranging all the servicing, car insurance and everything else that would’ve otherwise been included in your agreement.

When you take out your novated lease through Savvy, we offer customised solutions if you want to pick and choose what to include in your package. For example, we can offer a fully maintained novated lease without car insurance included.

What happens at the end of my lease?

Woman sitting in new car holding the keys

Option 1: Sell the car and upgrade

If you're coming up to the end of your novated lease term and want to refresh your wheels, you can sell your current car to cover the residual payment and start a new agreement with a new car.

Handshake agreement to sell a car

Option 2: Sell the car and end the lease

Alternatively, if you decide against continuing with your novated lease, you can simply sell your car and end the agreement. For both this option and the first, you'll have to pay any difference between the car's sale price and the residual value out of pocket.

Man driving car

Option 3: Refinance the residual

You can continue to take advantage of your novated lease's tax benefits and keep your current car by refinancing your residual. This extends your existing car lease term by as long as a further two years.

Man and woman buying car at dealership

Option 4: Pay the residual yourself

Finally, you can choose to pay the residual yourself and take full ownership of the car. This ends your novated lease and the tax benefits that come along with it, but there's no longer any interest in your car from third parties.

Why trust Savvy with your novated lease?

No cost for employers

Your employer doesn't have to pay anything extra. No FBT liabilities and no admin- we take care of everything for them.

Unlock thousands in savings

Save thousands per year in tax and GST plus get access to exclusive novated leasing discounts and Savvy Benefits' partners.

Free expert consultation

Whether you know exactly what you want or you're learning about novated benefits for the first time we're here to help.

What impacts the cost of my novated lease?

Beyond choosing between fully maintained (including what costs you want to incorporate into your payments) and non-maintained leases, there are plenty of things that have an effect on the cost of your novated lease. Some of these are:

  • Interest: much like a car loan, interest is applied to your novated lease payments. It accounts for factors such as the amount borrowed, administrative expenses and the risk associated with leasing to the borrower.
  • Finance and admin fees: these are charges associated with setting up and managing the lease.
  • Choice of vehicle: the make, model and specifications of the car you choose will impact the overall cost.
  • Post-tax contributions: most cars are subject to fringe benefits tax (FBT), which is required to be offset through post-tax contributions. However, electric vehicles are exempt from FBT, which can result in lower costs compared to traditional petrol or diesel cars.
  • Driving distance: your annual mileage affects running costs, which can influence lease price or tax savings and the overall effectiveness of the lease.
  • Car insurance: comprehensive car insurance is mandatory for novated leases. The cost of your car insurance policy can vary based on factors like your driving history, where you live and what car you drive.

In terms of car insurance for your novated lease, you can either include your own or opt for Savvy Fleet Insurance, which is specifically designed for novated leases (eligibility criteria apply).

Leasing a vehicle can provide substantial cost savings for both personal and business use. However, it’s important to understand all the potential costs involved. Since lease agreements and individual financial situations can vary greatly, it’s best to speak with an expert who can offer a tailored example based on your specific circumstances.

Novated lease tax benefits

One of the big advantages of novated leases is the tax benefits they offer. Here’s what you can expect from your novated lease:

  • Income tax: as mentioned, because lease payments come out of your pre-tax income, the amount of income tax you’re liable to pay is reduced. This is despite the fact that you’re earning the same amount.
  • GST on purchase: the GST on the purchase of the vehicle can be claimed by your leasing company, which can pass the savings of potentially thousands of dollars on to you. In 2025-26, the maximum credit claimable is $6,334.
  • GST on running costs: it isn’t just the car purchase that you can avoid GST on. Insurance, registration, maintenance and fuel can all be GST-free, in addition to the ability to pay for them out of your pre-tax income (in the case of fully maintained novated leases).
Adrian Taylor - General Manager, Novated Leasing

Getting the best car loan deal

"Novated leasing is a tax-effective way to finance your vehicle while improving your personal cash flow. Whether your vehicle is new or pre-owned, used for business or personal travel, if you pay income tax, a novated lease could save you money and effort. Check online reviews for post-sale service and be sure to pick a company that values you for the life of your lease."

Adrian Taylor, General Manager, Novated Leasing
Adrian Taylor - General Manager, Novated Leasing
Adrian Taylor
General Manager, Novated Leasing

Your potential novated lease savings

Car loan Mortgage equity loan* Cash Novated Lease Novated Lease (EV)
Vehicle purchase price (inc GST) $46,793 $46,793 $46,793 $40,983 $40,983
Running costs over 5 years $32,082 $32,082 $32,082 $29,165 $18,440
Finance cost (inc. interest and fees) $54,920 $54,147 $0 $48,678 $48,678
Tax saved over 5 years $0 $0 $0 $12,783 $25,775
Novated lease cost comparison $87,002 $86,229 $78,875 $65,060 $41,343

*Finance cost shown if the amount added to your mortgage is paid off in five years. If the mortgage top up amount to purchase a car is paid off over the remaining mortgage term, additional interest of over $30,000 could be charged over a 20-year period.

Figures are for illustrative purposes only, based on annual gross salary of $80,000 and travelling 15,000km/year over a five-year term. Vehicle price of $46,793 drive away, fuel price of $1.85 (or $0.35/kWh). Compared to a five-year secured loan of 6.49% p.a. and a mortgage redraw of 5.90% p.a.

Savvy exclusive novated lease savings

Savvy currently has some exclusive discounts available on different vehicles if taken out through a novated lease. As of August 2025, Savvy Benefits is currently offering $3,000 off Tesla Model Y, 4% fleet discounts on select BYD models and $500 cashback on the INEOS Grenadier. 

How we support you

  • We help you feel comfortable asking any questions and give the support you need to make informed decisions.

  • Highly personalised care starts with your very own, dedicated consultant who you can contact by email, SMS or call.

  • Benefit from over 15 years of industry experience to quickly identify fact from fiction.

  • We think ahead and help you consider how a novated lease can add value towards your future goals and objectives.

Novated leases and fringe benefits tax (FBT)

One potential cost to consider when leasing your car is FBT. It’s a tax that applies to fringe benefits provided to employees by their business outside of their traditional salary. Novated leases are a common example of a fringe benefit, but they can also include health insurance and travel or accommodation allowances. 

While this tax is charged to employers, this is often passed on to the employee. As of the 2024-25 FBT year, this is charged at a rate of 47% on the taxable portion of the benefit (equivalent to 45% plus the 2% Medicare Levy).

However, by making post-tax contributions to your car’s running costs, FBT is reduced to $0, which is why businesses allow employees to access the benefits of novated leasing. Each of the costs listed under the fully maintained lease section (as well as new tyres) can be paid for out of your post-tax income to cut down on your FBT liability. You don’t need to worry, though: your novated leasing provider works all this out for you.

The amount you contribute post-tax can be calculated in one of the following two ways:

  1. Statutory formula: a flat 20% rate on the cost of all car fringe benefits.
  2. Operating costs: in cases where cars are used largely for business purposes, any private use is calculated as an overall percentage and applied to pre-tax expenses (inclusive of GST). A logbook is required to track business and private use.

The following is an example of how FBT may look if not using either method:

Cost of car $50,000
Statutory formula 20%
Taxable portion $10,000
Grossed-up value (Type 1 @ 2.0802) $20,802
FBT payable $9,776

Here’s how the above example would look using the ECM:

Cost of car $50,000
Statutory formula 20%
Taxable portion $10,000
Post-tax contribution $10,000
ECM per fortnight $384
ECM over a year $10,000
FBT payable $0

What cars are exempt from FBT?

The list of vehicles that are exempt from FBT as of August 2025 is as follows:

Make Models
Abarth 500e Turismo, 500e Scorpionissima
BMW iX1, iX2, iX3 (M Sport only), i4 eDrive35
BYD Atto 3, Dolphin, Seal, Sealion 7
Chery C5
Cupra Born, Tavascan
Deepal S07
Ford Mustang Mach-E (Select and Premium only)
Fiat 500e
Geely EX5
GWM Ora
Hyundai Kona (all electric variants), Inster Ioniq 5 (all variants except N, Epiq N Line AWD and Epiq DSM AWD), Ioniq 6
Kia EV3, EV5, EV6 (all variants except GT), Niro (all electric variants)
Leapmotor C10 (all electric variants)
Lexus UX
Mercedes-Benz EQA, EQB
MG IM5, IM6, MG4, MGS5 EV
Mini Aceman, Cooper (all electric variants), Countryman (all electric variants)
Nissan Ariya, Leaf
Peugeot E-308
Polestar Polestar 2, Polestar 4 (all variants except Long Range Dual Motor with Packs)
Renault Megane E-Tech
Skoda Elroq, Enyaq
smart smart #1, smart #3
Subaru Solterra
Tesla Model 3, Model Y
Toyota bZ4X
Volkswagen ID. 4, ID. 5, ID. Buzz (Van and Wagon Pro variants only)
Volvo C40, EX30, EX40
Xpeng G6
Zeekr Zeekr X

All models and prices are sourced from CarsGuide and correct as of August 2025.

How to arrange a novated lease with Savvy

  1. Find your car

    We can help you lock in your vehicle if you haven’t already.

  2. Review your budget

    We'll set a tailored budget that your employer transfers to us each payroll.

  3. Have your deductions set up

    Your payslip will now show both pre-tax and post-tax deductions.

  4. Enjoy on-road costs being bundled into your payments

    Everyday car expenses, such as fuel, registration and insurance, are paid pre-tax.

 

Is a novated lease worth it?

Whether a novated lease is worth it for you depends on several factors. Here are some situations where a novated lease may (or may not) be right for you:

  • You’re a high income earner: taking out a novated lease on a higher income could result in more meaningful tax savings, especially if it moves you into a lower tax bracket.
  • You’re a low income earner: if you’re already paying a low amount of tax, it’s worth considering whether the tax savings from a novated lease would be significant enough to make it worthwhile..
  • You’re leasing an EV: with their exemption from FBT, EVs are much more lucrative on a novated leasing arrangement than purchasing them outright or taking out a loan.
  • You’re leasing a car up to the claimable GST limit: as mentioned, the maximum GST credit claimable is $6,334 in 2025-26, meaning the maximum GST-free car price is $69,674. Choosing a car at or around this limit will deliver the highest GST credit possible.
  • You’re leasing a cheap used car from a private seller: these cars may not offer much value in the way of tax savings, nor will there be any GST claimable on the purchase.
  • You’re going to use your car a lot: if you’re a person who loves racking up the kilometres, you can really start to experience the benefits of having on-road costs bundled into your package.

If you want to know more and explore your options, you can get a quick quote with us today and speak to one of our novated leasing experts.

Driver Handbook

Download our Driver Handbook for all the information you need to know about getting the most from your novated lease with Savvy Benefits!

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Novated lease frequently asked questions

If I leave my job, what happens to my novated lease?

If you move jobs and your new place of work doesn’t offer novated leasing, your current agreement will become de-novated. This means it’ll revert to post-tax payments, stripping away the tax benefits you’d otherwise enjoy.

However, if you’re moving to another place that offers novated leasing, you can easily have your lease re-novated to your new job and resume savings. Savvy is a leading expert and can help both you and your new employer get set up.

Note: any unspent budgets will need to be returned to you through payroll and cannot be transferred to your new employer.

Can I get a novated lease if I have a HECS debt?

Yes – you can get a novated lease if you’re currently paying off your HECS debt. However, whether your salary sacrificing impacts your HECS payments depends on the car you buy and its FBT status. Packaging towards FBT-exempt benefits, such as an EV, reduces your taxable and assessable income, which can result in your HECS payments being reduced.

For example, someone on a $100,000 salary who novates a $50,000 EV over four years at 8.50% p.a. with a 37.5% residual could move from the 5.50% HECS payment bracket to the 5.00% bracket.

Can I get a novated lease to finance a used car?

Yes – Savvy is one of the only novated leasing providers in Australia that can help you find a pre-owned car through any national dealership, on top of new and demo models. You can be approved for a lease for a vehicle as old as 15 years at the end of your term.

Can I use a novated lease to finance a car from a private seller?

Yes – we can help you with that, too! You won’t just be restricted to cars sold by dealerships; you can take out a novated lease for an eligible vehicle purchased from a private sale.

Can any business provide novated leasing to their employees?

Yes – any business can offer novated leasing as an employee benefit. Businesses are often required to have been trading for two or more years and be registered for GST. However, if you’re a sole trader, a novated lease is unlikely to be the best option compared to other forms of finance.

Does a novated lease require a credit check?

Yes – novated lease providers will perform a credit check as part of your application process. However, just because you have bad credit doesn’t mean you won’t be approved for a novated lease. That’s because the money is deducted before you see it, meaning it’s harder to default on payments while you’re employed.

How are novated leases different to car loans?

There are several key differences between novated leases and car loans. Perhaps the biggest are that car loans can be taken out by anyone, not just those whose employer offers them, and that they don’t offer any tax benefits (unless they’re used for business purposes). Car loans are an arrangement between only you and your lender and can be repaid over as many as seven years.

How are novated leases different to business car leases?

Novated leases and commercial car leases are similar in principle, but there are several key differences. These include:

  • Salary sacrificing: business leases don’t take advantage of salary sacrificing, as the car is leased to the business for business use.
  • Usage: cars leased by a business must be used for business purposes at least 50% of the time.
  • Tax benefits: up to 100% of your business lease payment is tax-deductible. Additionally, you may be able to claim a GST credit for any payments that include GST (though it’s important to speak with a tax professional if you’re unsure).
  • Residual: business finance leases often come with a residual value, which are the same as those on novated leases, but operating leases don’t.
  • Running costs: business operating leases allow you to include your car’s on-road costs in your payments, but this isn’t the case for finance leases.
  • Option to hand back your car: under a business operating lease, you can use the car for your specified term and hand it back afterwards, with obsolescence risk remaining with your lease provider.