Is a novated lease worth it?

Make an informed decision today.

What is a novated lease?

Novated leasing is an ATO-approved benefit in which all the costs for running a car are taken directly out of your salary, through a combination of pre and post tax deductions by your employer.

The tax savings associated with a novated lease and ease of budget management make it an appealing option for many working Australians.

Comparing a novated lease with a traditional car loan

Thinking of a car loan? Here’s how a novated lease could help you save when purchasing a car of the same value—with & without an FBT exemption.

Car Loan

Non-EV Lease

EV Lease

Vehicle driveaway price

This example uses a car with a list price of $71,470, inclusive of GST.

$71,470

Upfront savings

With a lease, no GST* is paid on the cost of the vehicle up to the maximum GST-claimable amount. In this example, the GST savings are $6,155.

$6,155

Monthly costs

This amount refers to the finance and total running costs. The novated lease payment is less due to no GST payable on the lease and running cost amounts.

$1,421

$1,463

Ongoing savings

With a lease, there are savings on income tax and GST. These savings are higher for leases that are FBT-exempt as deductions are pre-tax only.

$187

$614

Impact to monthly pay

This is the amount by which take-home pay is reduced. The difference between a novated lease and a car loan is as shown in the table.

$1,421

$1,422

$995

Total net cost over five years

With a lease, there are savings on income tax and GST. These savings are higher for leases that are FBT-exempt as deductions are pre-tax only.

$105,499

$85,343

$59,689

Residual Value

The residual value is based on ATO depreciation guidelines for a novated lease and will need to be paid to the financier or refinanced for an extended term.

$23,211

Net savings over five years

This shows the total potential savings (the difference in costs) with a novated lease when compared to a car loan.

$20,156

$45,810

*Costs are estimates only based on Gross Annual Salary of $85K, 60-month lease, 15,000km p.a., vehicle purchased in NSW with potential discounts, typical running cost inclusions and tax considerations. Information provided is general in nature. We have not taken into account your personal circumstances or financial objectives. Your actual savings are dependent on your personal circumstances, and tax exemptions are subject to eligibility. We recommend seeking independent legal, financial or other professional advice before making any decisions related to this information. Car loan calculation along with the Novated lease calculations factor in a 7.29% interest rate.

Calculate your savings

Vehicle options with a novated lease

New

Have a new car in mind? You can unlock exclusive fleet discounts and substantial tax savings with a new vehicle on a Flare Cars novated lease.

Used

You can take out a novated lease on a used car provided the vehicle meets certain requirements. Follow the link below for more information on how this works.

Current vehicle

Already have a car? You may be able to sell and lease back your own vehicle to take advantage of the tax savings associated with a novated lease.

Electric cars and FBT exemption

What is FBT?

Fringe benefits are extra perks offered to employees in addition to their salary.

They can include benefits like discounted loans, childcare fee reimbursements and novated car leases. These benefits are offered as part of your salary package.

These perks are subject to Fringe Benefits Tax (FBT), as regulated by the ATO. FBT applies even if the benefit is provided by a third party and is separate to income tax as it is calculated on the taxable value of the fringe benefit.

Advantages of going electric

Electric vehicles are a popular choice when considering a novated lease as many qualify for an FBT exemption. An eligible electric vehicle must be:

Claiming electricity charging costs on a novated lease

Claim your charging costs through the Flare cars driver portal. The ATO allows two methods of reimbursement.

You cannot use a mix of the two methods and must choose one or the other, depending on your personal circumstances.

Flat, distance based method

You can make a flat, distance-based claim of 4.2c/km. The flat, distance-based claim depends on the number of kilometers traveled at the time of making the claim.

True cost method

The true cost-of-charging claim is based on each expense incurred at a supercharger port or from a home electricity bill.

What happens at the end of a novated lease?

Choose between the following three options at the end of your novated lease.

How is the residual value of a car calculated?

A car’s end-of-lease residual value is determined according to the ATO guidelines below.

Lease term	Percent of original price Excluding GST
1 year	65.63%
2 years	56.25%
3 years	46.88%
4 years	37.5%
5 years	28.13%

Things to consider with a novated lease

Got questions?

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How do I get a personalised quote?

It’s as simple as providing a few details. Complete the form below and we’ll get back to you shortly with a quote tailored to you.

Can I choose my lease term?

When you initiate a lease, you can choose a term between one to five years, as per your needs and budget. After the initial term, you might be eligible for an extension if the vehicle and new lease meets the finance credit requirements.

Why do I have both pre- and post-tax deductions?

Employee benefits sometimes attract fringe benefit tax (FBT) liabilities. To reduce this liability, whilst maximising your savings, Flare uses a process called the Employee Contribution Method. This method splits some costs into pre- and post-tax deductions, and Flare will work with your payroll department to help set this up on your behalf.

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Is a novated lease worth it?

What is a novated lease?

Comparing a novated lease with a traditional car loan

Car Loan

Non-EV Lease

EV Lease

Calculate your savings

Vehicle options with a novated lease

Electric cars and FBT exemption

Fringe benefits are extra perks offered to employees in addition to their salary.

Electric vehicles are a popular choice when considering a novated lease as many qualify for an FBT exemption. An eligible electric vehicle must be:

Claim your charging costs through the Flare cars driver portal. The ATO allows two methods of reimbursement.

What happens at the end of a novated lease?

Own outright

Sell the car

Extend your lease

How is the residual value of a car calculated?

Things to consider with a novated lease

Change of employment

Residual payment

Eligibility requirements

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