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Flare Cars

Is a novated lease worth it?

Make an informed decision today.

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PHEV Cars

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.

Save on your car with a novated lease

Below is an example demonstrating how leasing a Tesla Model Y over 60 months can be more cost-effective compared to purchasing it outright.

Buying with cash

$95,704

Zero tax savings

Full GST is usually applicable, and running costs are paid from post-tax income.

Higher upfront costs

Buying a car outright requires paying for the car in full and potentially saving up for the total vehicle cost.

Market rates apply

Fleet pricing is not available when you buy a car outright. You may have to pay the advertised rates on most occasions.

Novated lease

$81,110

Great tax savings

Save on GST on the vehicle purchase and reduce running costs by using pre-tax income. By taking out a novated lease you’ll be reducing your total taxable income.

No upfront costs

Lease payments require no upfront deposit.

Better deals

A novated lease could give you access to exclusive fleet pricing - which can help you pocket massive savings off the driveaway price.

Buying a Tesla Model Y RWD MY 2025 with cash compared to a novated lease over 5 years.

Calculate your savings

Cleaning Car

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. 

See latest deals

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. 

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. 

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Electric cars and FBT exemption

Charging car

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:

  • Less than the luxury car threshold of $91,387 (as of FY2024/25)
  • First in use on or after 1 July 2022
  • Designed to carry a load of less than one tonne and accommodate a maximum of eight passengers to qualify 
for an FBT exemption
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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.

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.

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Own outright

Pay the car's residual value (usually less than its market value) to own the car at the end of your lease.

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Sell the car

Don’t want to own it? Sell it and retain any profits after covering the residual value.

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Extend your lease

Extend the current lease for a further term to continue enjoying your vehicle.

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 year65.63%
2 years56.25%
3 years46.88%
4 years37.5%
5 years28.13%
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Things to consider with a novated lease
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Change of employment

If you’re considering changing employers, it’s important to enquire whether they can support an existing novated lease. If required, Flare can help on your behalf.

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Residual payment

Unless you extend your lease, you’ll be required to pay a residual payment at the end of your lease term, also known as a balloon payment.

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Eligibility requirements

If you are self-employed or work as a short-term contractor, you may not be eligible for a novated lease. However, Flare can support contractors in certain circumstances.

Got questions?

We’ve got answers

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. 

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. 

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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Flare Cars team

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Is a novated lease worth it? Make an informed decision today. Calculate savings 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 […]