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Novated lease vs car loan

Novated lease vs car loan: which costs less?

A novated lease is paid from your pre-tax salary through your employer and the financier claims back the GST on the car, while a car loan is paid from after-tax income but is yours alone and not tied to your job. For a battery-electric car under the FBT threshold the lease usually wins, by about $4,000 to $8,000 a year on a typical professional income in our worked comparison; for a petrol or diesel car, FBT takes most of the saving and a car loan is usually cheaper after tax. Compare the full-term after-tax cost of both quotes, not the fortnightly figure.

Novated lease vs car loan, side by side

 Novated leaseCar loan
Who can get oneEmployees whose employer offers salary packagingAnyone who meets the lender's criteria
Paid fromPre-tax salary, through payrollAfter-tax income
GST on the carClaimed back by the financierYou pay it
Running costsBundled into the pre-tax deductionPaid separately, after tax
FBTExempt for eligible EVs; post-tax contributions on other carsNot applicable
Income statementShows a reportable fringe benefit (can affect HELP and some payments)No effect
If you change jobsMove the lease to the new employer or take over the paymentsNo effect
At the endResidual due (28.13% of cost on a five-year lease, plus GST): pay, refinance or tradeNothing, unless you chose a balloon
Usually cheaper forBattery-electric cars under the FBT thresholdPetrol, diesel and plug-in hybrid cars

What does a car loan cost per month?

Monthly principal and interest repayments over 5 years, by loan amount and interest rate
Loan amountMonthly repayment at
6.5%p.a.8.5%p.a.10.5%p.a.
$30,000$587$615$645
$45,000$880$923$967
$60,000$1,174$1,231$1,290

Illustrative monthly principal and interest repayments over 5 years, before fees and charges. Rates are examples, not offers; your rate depends on the lender and your circumstances. 8.5% p.a. is the car loan rate in our worked comparison; the major banks' secured car loans started at 6.49% to 6.79% p.a. on 30 September 2026. The lease side, by car price, is on the novated lease guide. Run your own numbers.

For the lease side, see novated lease finance by car price: on the same five-year term, a lease finances the GST-exclusive price and leaves a residual, so its monthly finance figure is lower but a lump sum falls due at the end.

Calculator

Car loan repayment estimate

Loan amount$50,000
$10,000$100,000
Interest rate8.50% p.a.
5.00% p.a.15.00% p.a.
Loan term5 years
1 year7 years
Monthly repayment
$1,025.83

Car loan lenders to compare against a lease quote

If the lease does not win after tax, these lenders publish secured and green car loans. Several publish discounts for electric vehicles.

Car loan lenders to compare against a lease quote: each lender's type, the products it offers and its current rate
Commonwealth Bank of AustraliaMajor bankProducts:
  • Secured (new vehicle)
  • Secured (used vehicle)
Current rate:
6.79%p.a.
8.20% p.a. comparison rate*
Personal Loan Secured (New Vehicle) · Secured Fixed Rate Car Loan, secured by the car being bought: from rate for excellent credit (rates up to 11.29% p.a.); comparison on a $30,000 loan over 5 years.
Westpac Banking CorporationMajor bankProducts:
  • Secured (new vehicle)
  • Secured (used vehicle)
  • EV / Green
Current rate:
6.49%p.a.
7.90% p.a. comparison rate*
Car Loan Secured · Car Loan for petrol, diesel or LPG cars, fixed rate, secured by the car: from rate; the rate offered depends on your credit assessment.
Bank AustraliaCustomer-ownedProducts:
  • EV / Green
  • Secured (used vehicle)
Current rate:
6.29%p.a.
6.29% p.a. comparison rate*
Clean Energy Car Loan · Electric Vehicle Loan, fixed rate, secured, new electric vehicles; establishment fee waived for fully electric vehicles; comparison on a $30,000 secured loan over 5 years.
Liberty FinancialNon-bankProducts:
  • Secured (new vehicle)
  • Secured (used vehicle)
Current rate:
8.99%p.a.
10.65% p.a. comparison rate*
Liberty Drive Secured · Flexible car loan, secured, new and used cars: from rate; comparison on a $30,000 new-car loan over 5 years with no balloon.
MoneyMeSpecialistProducts:
  • Secured (new vehicle)
Current rate:
6.24%p.a.
7.13% p.a. comparison rate*
MoneyMe Secured Car Loan · Secured car loan, variable rate, new or used vehicles: from rate for excellent credit history (maximum 26.10% p.a.); $12.50 monthly fee.
Now FinanceSpecialistProducts:
  • Secured (new vehicle)
Current rate:
7.59%p.a.
8.43% p.a. comparison rate*
NF Secured Car Loan (Tier 1) · Vehicle Loan secured by the vehicle, new or used: from rate (rates up to 15.39% p.a.); establishment fee up to $595.
PlentiSpecialistProducts:
  • Secured (new vehicle)
  • Secured (used vehicle)
  • EV / Green
Current rate:
7.99%p.a.
9.78% p.a. comparison rate*
Plenti Car Loan (Tier 1) · Secured car loan, new or demo vehicle, homeowner with exceptional credit: from rate (rates up to 12.99% p.a.); comparison on $30,000 over 60 months including a $14.90 monthly fee.
National Australia BankMajor bankProducts:
  • Secured (new vehicle)
  • Secured (used vehicle)
Current rate: NAB rate card (opens in a new tab)
BankSAMajor-bank brandProducts:
  • Secured (new vehicle)
  • Secured (used vehicle)
Current rate: BankSA rate card (opens in a new tab)
IMB BankCustomer-ownedProducts:
  • Secured (new vehicle)
  • Secured (used vehicle)
Current rate: IMB rate card (opens in a new tab)
Show all 14 lenders
Car loan lenders to compare against a lease quote, continued
Newcastle Permanent (Newcastle Greater Mutual Group)Customer-ownedProducts:
  • Secured (new vehicle)
Current rate: Newcastle Permanent rate card (opens in a new tab)
Teachers Mutual BankCustomer-ownedProducts:
  • Secured (new vehicle)
  • Secured (used vehicle)
Current rate: Teachers Mutual rate card (opens in a new tab)
Pepper MoneyNon-bankProducts:
  • Secured (new vehicle)
  • Secured (used vehicle)
Current rate: Pepper Money rate card (opens in a new tab)
Angle FinanceSpecialistProducts:
  • Secured (new vehicle)
Current rate: Angle Finance rate card (opens in a new tab)

Inclusion is editorial reference, not a recommendation. Rates change often, so we only show a rate we captured from the lender's own page in the last 60 days, with a link to that page; otherwise we link to the lender's rate card where it publishes one. The broker you are matched with compares the lenders on their own panel.

See all 20 car loan lenders

* WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees, or other loan amounts might result in a different comparison rate. Car loan comparison rates are based on a secured loan of $30,000 over 5 years.

Novated lease vs car loan at a glance
  • A novated lease is paid from pre-tax salary and saves the GST on the car; a car loan is paid after tax
  • For a battery-electric car under the FBT threshold, the lease usually saves about $4,000 to $8,000 a year on a typical professional income
  • For a petrol, diesel or plug-in hybrid car, FBT usually tips the after-tax comparison to the car loan
  • A lease depends on your employer and your job; a car loan does not
  • Draft law released in September 2026 would narrow the EV exemption for commitments from 1 April 2027

How a novated lease works, compared with a car loan

A car loan is between you and a lender: you borrow, buy the car and repay from your take-home pay. A novated lease involves three parties, you, your employer and the finance company, and the arrangement flows like this:

  1. You choose a car, new or used, any make and model
  2. Finance company purchases the car, they own the vehicle during the lease term
  3. Three-way agreement signed, a “deed of novation” is signed by all three parties
  4. Employer deducts from your salary, lease payments and budgeted running costs come from your pre-tax salary each pay cycle
  5. At lease end, pay the residual value to own the car, refinance, trade in, or start a new lease on a different car

The “novation” means your employer takes on the obligation to make payments on your behalf from your salary. If you leave that employer, the obligation reverts to you personally, or you can novate the lease to a new employer. A car loan never involves your employer at all.

Which costs less: the worked comparison

Our EV FBT analysis models a $65,000 battery-electric car over five years for someone on a $130,000 salary. The novated lease, after the post-tax contribution, comes to roughly $530 to $650 a fortnight. The same car on a secured car loan at 8.5% p.a. over five years, with running costs paid after tax, runs to roughly $740 to $810 a fortnight. The difference is $4,800 to $7,400 a year.

Change the car to petrol or diesel at the same price and the picture flips: no exemption applies, FBT is covered from after-tax pay, and the after-tax comparison usually favours the car loan. The same applies to a car priced above the fuel-efficient threshold, and to a plug-in hybrid arranged after 1 April 2025.

EVs and the draft law
  • Battery-electric and hydrogen fuel cell cars under the fuel-efficient threshold ($91,661 for 2026-27) are FBT exempt today
  • Treasury's September 2026 draft keeps the full exemption for commitments before 1 April 2027, then only for cars of $75,000 or less to 31 March 2029, then a 25% discount
  • A 25% discount takes about 60% of the tax saving away, which narrows the gap to a car loan
  • What the draft law means for a novated lease

Running costs: bundled or paid yourself

A fully maintained novated lease bundles the following costs into your pre-tax salary deduction; with a car loan you pay them yourself from after-tax income:

  • Fuel or electricity charging, budgeted based on your estimated annual kilometres
  • Comprehensive insurance, arranged through the lease provider
  • Registration and CTP, renewal costs included in the budget
  • Scheduled servicing, manufacturer-recommended services covered
  • Tyre replacement, budgeted based on expected wear
  • Roadside assistance, where the package includes it

Budgeted running costs are reconciled against what you actually spend, so check how the provider handles any surplus or shortfall.

When a car loan is the better choice

  • Your employer does not offer salary packaging
  • The car is petrol, diesel or a plug-in hybrid, or priced above the fuel-efficient threshold
  • You expect to change jobs, or your income may drop, during the term
  • A reportable fringe benefit would raise your HELP repayments or affect a payment you receive
  • The lease quote carries a marked-up car price or high fees that eat the tax saving

When a novated lease is the better choice

  • A battery-electric car under the threshold, with a commitment that keeps the full exemption
  • A stable job with an employer that offers salary packaging
  • A marginal tax rate high enough for pre-tax deductions to be worth having
  • A provider whose car price and fees you have checked against a quote of your own
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WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees, or other loan amounts might result in a different comparison rate. Comparison rates are calculated on a secured loan of $150,000 over 25 years for home loans, a loan of $30,000 over 5 years for car and personal loans, and $50,000 over 5 years for equipment finance, unless the lender states another basis.

Novated Lease vs Car Loan FAQs

Is a novated lease better than a car loan?
For a battery-electric car under the FBT threshold, usually yes: our worked comparison puts the saving at about $4,000 to $8,000 a year on a typical professional income. For a petrol or diesel car, usually no: FBT claws back most of the tax saving and the after-tax comparison usually favours the car loan. Either way, compare the full-term after-tax cost of both quotes, including running costs, not the fortnightly figure.
Is a novated lease cheaper than a car loan for a petrol car?
Usually not. Without the EV exemption, FBT applies and is normally covered by paying part of the package from after-tax salary (the employee contribution method), which removes much of the income tax saving. The GST saving on the car and running costs remains, so get both quotes and compare the total after-tax cost over the full term.
What happens to a novated lease if I change jobs?
The lease does not end: it can move to a new employer that offers salary packaging, or the payments come back to you from after-tax income, which removes the tax benefit. A car loan is unaffected by a job change. Under the draft EV law, changing employers also counts as a new commitment for the FBT concession.
Can I get a novated lease if my employer does not offer salary packaging?
No. A novated lease needs your employer to run the deductions through payroll, usually with a salary packaging provider, and without that the FBT exemption is not available. If your employer does not offer it, a car loan is the option, and the EV discounts some lenders publish are worth checking.
Does a novated lease affect my HELP repayments?
It can. The benefit shows on your income statement as a reportable fringe benefit, worked out as if no exemption applied, and that amount can affect HELP repayments, the Medicare levy surcharge and some government payments. A car loan has no such effect. Check with your accountant if any of these apply to you.
What running costs are included in a novated lease?
A fully maintained novated lease typically includes fuel or charging costs, comprehensive insurance, registration, scheduled servicing, tyres, roadside assistance, and CTP (greenslip). All these costs are bundled into one pre-tax salary deduction. With a car loan you pay them yourself from after-tax income.
Is FBT payable on a novated lease?
For petrol, diesel and plug-in hybrid cars, yes: FBT applies to the private use and is usually covered by post-tax contributions. Battery-electric and hydrogen fuel cell cars under the fuel-efficient luxury car tax threshold ($91,661 for 2026-27) are exempt. Plug-in hybrids lost the exemption from 1 April 2025 unless already under a binding commitment, and Treasury's September 2026 draft law would narrow the EV exemption for commitments from 1 April 2027.
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