Novated lease vs car loan: which saves more in 2026?
Source: ATO
A side-by-side comparison of total cost of ownership for a $65,000 vehicle — novated lease with salary packaging versus a standard secured car loan.
The most common question from employees exploring vehicle finance is whether a novated lease actually saves money compared to a personal car loan. The answer depends on your income, vehicle choice, and whether your employer offers salary packaging — but for most employees earning above $80,000, the novated lease wins on total cost.
With a car loan, you pay from after-tax income. Every dollar of repayment has already been taxed at your marginal rate — 32.5%, 37%, or 45%. With a novated lease, a significant portion comes from pre-tax salary, reducing your taxable income. On a $120,000 salary packaging a $65,000 vehicle, income tax savings alone can exceed $4,000 per year.
GST savings are unique to novated leasing. Because the finance company purchases the vehicle (not you), it claims GST input tax credits. This reduces the financed amount by up to approximately $6,334. A car loan offers no GST benefit on the purchase price.
For eligible electric vehicles, the FBT exemption until March 2027 eliminates the post-tax ECM component entirely. This makes EV novated leases dramatically cheaper than both petrol novated leases and any car loan option. Even after the phase-down, the 25% FBT discount maintains an edge.
Car loans do have advantages: simpler ownership during the term, potentially lower interest rates, and no employer dependency. If your employer doesn't offer salary packaging, a car loan is your only option. If they do, run the numbers through our calculator before deciding.
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Source: ATO
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Source: ATO
How GST savings work on a novated lease purchase
Because the finance company — not you — purchases the vehicle, GST on the purchase price can be claimed as an input tax credit, effectively reducing the cost by up to $6,334.
Source: ATO
