The honest answer is: it depends on three numbers. Your marginal tax rate, whether the car is FBT exempt, and the interest rate and fees in the quote. Get those three right and the decision is usually obvious. The examples below use the same model as our calculator, with 2026-27 tax rates, an 8% lease rate, a three-year term and 15,000 km a year.
Four worked examples
| Scenario | Pre-tax deduction | Post-tax (ECM) | Tax saved | Net cost via lease | Net cost buying | Saving per year |
|---|---|---|---|---|---|---|
| $95,000 salary, $58,000 electric car | $16,117 | $0 | $5,157 | $10,960 | $17,729 | $6,769 |
| $95,000 salary, $42,000 petrol car | $6,022 | $8,400 | $1,927 | $12,495 | $15,865 | $3,369 |
| $40,000 salary, $42,000 petrol car | $6,022 | $8,400 | $1,024 | $13,399 | $15,865 | $2,466 |
| $160,000 salary, $75,000 electric car | $19,894 | $0 | $7,759 | $12,135 | $21,762 | $9,627 |
The pattern is the whole argument. The electric car on a middle income saves several thousand dollars a year because nothing is paid post-tax. The petrol car on the same salary saves a fraction of that, because the Employee Contribution Method moves 20% of the car's value back to post-tax money and the saving shrinks to the GST and the tax on the remaining running costs. The petrol car on a $40,000 salary, where the marginal rate is 15% plus Medicare levy, saves less again, and a provider fee of a few hundred dollars a year, which these examples exclude, takes a real bite out of it.
The pros
- Pre-tax running costs. Fuel or charging, insurance, registration, servicing and tyres all come out before tax, which no car loan offers.
- GST-free purchase and running. Your employer's GST credit on the car (up to the $69,883 car limit) and on running costs is passed through to you.
- The EV exemption. For a battery electric car at or below $91,661, no FBT and no post-tax contribution: the cleanest tax concession available to an ordinary employee.
- One payment, budgeted. Running costs are smoothed into each pay, which is why many people keep leasing even when the tax saving is modest.
- No deposit and no business use required. The car can be entirely personal.
The cons
- The residual. A balloon payment plus GST at the end. On a three-year lease it is 46.88% of the amount financed; the money has to come from somewhere, and a provider's "low monthly payment" is often a high residual.
- Interest and fees. Lease rates of 6.5% to 9.5% in 2026 are above a secured bank car loan, and management fees of a few hundred dollars a year are standard. Both are packaged pre-tax, which softens but does not remove them.
- Job change risk. The lease follows you, not your employer. Leave without a new packaging employer and the benefits stop while the payments continue.
- Reportable fringe benefits. Even an exempt EV is reported. The amount is not taxed but counts towards HELP/HECS repayment income (the 2026-27 threshold is $69,528), the Medicare levy surcharge, child support and some family payments. A graduate with a HELP debt can lose a meaningful slice of the saving here.
- The ECM on non-exempt cars. Paying 20% of the car's value post-tax every year is the price of avoiding FBT, and it is what makes petrol-car leases marginal for many people.
- Lock-in. Early termination fees apply, and running-cost budgets that are over-estimated sit with the provider until reconciled.
When it is clearly worth it
An eligible electric vehicle, a salary in the 30% bracket or higher, a stable job for the term, and no HELP debt or a small one. That combination is where the examples above show four-figure annual savings, and it describes a large share of the public sector and health workforce.
When to think harder
A petrol or diesel car on a salary under about $70,000; a quote with an interest rate above 9% or fees above $500 a year; a HELP debt large enough that the reportable amount pushes you into a higher repayment band; or any doubt about being with a packaging employer for the full term. In those cases run the calculator with the quote's actual rate and fees, and compare it with a bank car loan at the same term.
Run your own numbers before you decide
The calculator shows the mechanics. A provider quote adds the exact interest rate, fees and running-cost budget for your car and employer. Get two or three quotes and compare them line by line against the figures above before you sign.
See how a novated lease worksFrequently asked questions
Is a novated lease worth it?
For an eligible electric vehicle on a salary above about $45,000, almost always: the whole package is pre-tax with no FBT. For a petrol or diesel car the saving is smaller, comes mostly from GST and the tax on running costs, and can be beaten by a cheap car loan if the lease rate and fees are high. Run your own numbers rather than trusting a provider's example.
What are the disadvantages of a novated lease?
A residual payment at the end, interest rates above a secured car loan, provider fees, the lease reverting to you if you leave your job, reportable fringe benefits that can raise HELP repayments and Medicare levy surcharge, and, for non-exempt cars, a post-tax contribution that eats most of the tax saving.
Is a novated lease worth it on a low income?
Rarely below the $45,000 threshold where the marginal rate is 15% plus Medicare levy. The tax saving is small and the lease interest rate and fees usually outweigh it. Between $45,000 and $135,000 an EV lease is worth it for most people; a petrol car depends on the quote.
Is a novated lease better than a car loan?
For an FBT-exempt EV, usually yes by a clear margin. For other cars it is closer: the lease wins on GST and pre-tax running costs, the loan wins on interest rate and simplicity. Compare the lease's net annual cost after tax with the loan repayment plus running costs, which is what the calculator does.
Worked examples exclude provider fees, stamp duty and insurance variation, assume no HELP debt and an 8% lease rate, and use 2026-27 ATO parameters. General information, not financial or tax advice.