5 min read
Pros and cons of novated leasing
An honest assessment of when salary packaging a car makes sense — and when it doesn't.
Advantages
Novated leasing offers genuine financial benefits for the right candidate, particularly in higher tax brackets with stable employment.
- Lower income tax through pre-tax salary sacrifice
- GST saving on purchase price (up to ~$6,334) and running costs
- Fully maintained packaging covers fuel, insurance, servicing, tyres, registration
- EV FBT exemption can eliminate post-tax ECM entirely
- No deposit required — finance 100% of vehicle cost
- Employer handles payment administration and FBT reporting
- Budget certainty with fixed monthly deductions
Considerations
Novated leasing isn't right for everyone. Understand the commitments before signing.
- You don't own the vehicle during the lease
- Leaving your employer ends the novation — obligations revert to you
- Residual payment required at lease end (from after-tax income)
- Not all employers offer salary packaging
- FBT complexity for non-EV vehicles adds a post-tax ECM component
- Early termination can be costly
- Interest rates may be higher than a secured personal car loan
Who benefits most?
Novated leasing works best for employees with stable employment, employers who support salary packaging, and those in tax brackets where the salary sacrifice saving is meaningful — typically $80,000+ gross annual income. EV buyers before the 2027 phase-down see the largest advantage.
Key takeaways
- Best for higher income earners with supportive employers
- EV packages before 2027 lock in the strongest tax advantage
- Employment stability matters — job changes complicate the arrangement
- Always compare total cost of ownership vs a personal car loan for your situation
This content is for educational purposes only and does not constitute financial or tax advice. Verify details with the ATO, your employer, and your novated lease provider.