Novated Lease Calculator

What is a Novated Lease Calculator?

A novated lease calculator estimates how much you could save by financing a car through your salary instead of buying it with after-tax money. A novated lease is a three-way agreement between you, your employer, and a finance company: your employer deducts the lease payments and car running costs from your salary — mostly before tax — and pays them to the leasing provider on your behalf.

Because the payments come out of your pre-tax income, you reduce your taxable income and pay less income tax. You also avoid paying GST on the car's purchase price and on running costs like fuel, servicing, tyres, and insurance. For eligible electric vehicles, the savings are even larger because EVs under the luxury car tax threshold are completely exempt from Fringe Benefits Tax (FBT) — making a novated lease one of the most tax-effective ways to drive a new car in Australia.

How is a Novated Lease Calculated?

The calculator works through five steps: finance repayments on the GST-exclusive car price with an ATO minimum residual, annual running costs packaged GST-free, FBT treatment (exempt for eligible EVs, or neutralised via post-tax contributions for petrol and diesel cars), the tax saving from pre-tax deductions at your marginal rate, and finally a side-by-side comparison against a standard car loan paid from after-tax income.

Example: A $60,000 EV on a 5-year lease at 8.5% for someone earning $100,000 (32% marginal rate incl. Medicare) is fully FBT exempt — the entire package comes out pre-tax, typically saving $25,000–$35,000 over the term compared with a car loan.

How to Use This Novated Lease Calculator

Enter your annual gross salary and how many kilometres you drive per year. Then enter the car's drive-away price, fuel type, lease term, and the interest rate from your quote. The running cost fields are optional — leave any blank and the calculator estimates them from your kilometres and fuel type. Hit Calculate to see your estimated savings, fortnightly cost from take-home pay, tax and GST savings, residual value, and a full cost comparison against a standard car loan.

What Your Results Mean

The headline figure is your estimated total saving over the lease term versus buying the same car with a car loan from after-tax income — including paying out the residual at the end so both scenarios leave you owning the car. The fortnightly cost is the real reduction in your take-home pay. Tax saved per year is the income tax you avoid through pre-tax deductions. GST saved is the input tax credit on the purchase price plus the GST you skip on running costs. The residual is the lump sum owed at lease end — you can pay it out and keep the car, refinance it, or trade in and start a new lease.

Is This Calculator Accurate?

The calculator uses real 2025–26 tax brackets, the 2% Medicare levy, ATO minimum residual percentages, the GST input tax credit cap, and the Employee Contribution Method — the same mechanics used by major salary packaging providers. Actual quotes will differ based on the provider's interest rate, fees, insurance pricing, and your employer's packaging rules. Treat the result as a realistic estimate for comparing scenarios, then validate it against two or three formal quotes — providers' margins vary more than most people expect.

How to Choose Your Inputs

Interest rate: Novated lease rates typically run 7–9.5% — always read the rate from your quote rather than assuming. Lease term: Longer terms mean lower fortnightly costs but more interest; 3–5 years is most common. Kilometres: Be honest — overstating kms inflates the packaged running budget, and unused funds get reconciled but distort your comparison. Running costs: If you know your actual insurance and rego, use them; otherwise the auto-estimates are conservative averages. Admin fee: Check your provider's fee schedule — $200–$500 per year is standard.

Suitable for Women

Yes — novated leasing works identically for any employee. Two points worth noting: savings scale with your marginal tax rate, so the benefit is largest on incomes above $45,000 where pre-tax deductions save 32 cents or more per dollar. And because a novated lease is tied to your employment, women planning parental leave should check their provider's policy — most allow payments to pause or convert during unpaid leave, but the terms vary and are worth confirming before signing.

Suitable for Men

Yes — and the same income logic applies. Men considering a dual-cab ute or larger vehicle should note that the FBT exemption only applies to eligible electric vehicles; petrol and diesel vehicles use the Employee Contribution Method, which still delivers GST savings and pre-tax running costs but a smaller overall benefit. If you're tossing up between a petrol SUV and an EV equivalent, run both through the calculator — the FBT exemption frequently makes the EV cheaper to own despite a higher sticker price.

Can I Use This for an Electric Vehicle?

Absolutely — EVs are where novated leasing shines brightest. Since 1 July 2022, battery electric vehicles priced under the luxury car tax threshold for fuel-efficient vehicles (around $91,387) are fully exempt from FBT when provided through a novated lease. That means lease payments, charging, insurance, rego, servicing, and tyres can all come out of pre-tax salary with no employee contribution required. Select "Electric (EV)" in the fuel type dropdown and the calculator applies the exemption automatically. Note the plug-in hybrid exemption ended on 1 April 2025 for new arrangements — existing PHEV leases signed before that date are grandfathered.

Common Mistakes to Avoid

• Comparing the lease payment to a loan repayment directly. The novated payment includes fuel, insurance, rego, servicing, and tyres — a car loan repayment doesn't. Always compare total cost of ownership, which this calculator does.
• Forgetting the residual. The balloon payment at lease end is real money paid from post-tax funds. A lease that looks cheap fortnightly can hide a large residual.
• Assuming the savings apply equally on any income. On a $40,000 salary your marginal rate is 18%, so pre-tax deductions save far less than on a $120,000 salary at 39%. Petrol cars on lower incomes can come out roughly even or worse.
• Overstating annual kilometres. Inflated km budgets mean more of your salary is packaged than you actually spend, exaggerating the apparent benefit.
• Ignoring provider fees and inflated insurance. Some providers bundle expensive insurance or high admin fees that quietly eat the tax savings — always itemise the quote.

Limitations of This Calculator

This calculator simplifies a few things a formal quote will capture: it applies your top marginal rate to the whole pre-tax deduction (large deductions that cross a tax bracket save slightly less), it doesn't model the reportable fringe benefits amount that can affect HECS repayments, Division 293 tax, and family payments, and it assumes the Employee Contribution Method rather than the operating cost (logbook) method for non-exempt vehicles. Luxury car depreciation limits, early termination costs, and employer-specific packaging rules are also out of scope. For current FBT and EV exemption rules, see the ATO's electric cars exemption page.

Frequently Asked Questions