A novated lease can be one of the most tax-effective ways to get into a car, but it is not the right fit for everyone. This guide lays out the genuine pros and cons of a novated lease in Australia so you can weigh it against a normal car loan before you commit. Alpha390 arranges novated leasing through a specialist salary-packaging partner, and we will point you to the option that actually suits your situation.
What a novated lease is
A novated lease is a three-way arrangement between you, your employer and a leasing provider. Your employer deducts the lease and running costs from your pay — a mix of pre-tax and post-tax dollars — which can lower your taxable income. You get the use of the car and a single bundled payment covering finance and most running costs; your employer simply passes the deductions through.
The pros
| Benefit | Why it matters |
|---|---|
| Pay from pre-tax income | Part of the cost comes out before income tax, which can reduce your taxable income and overall cost. |
| GST savings | You generally do not pay GST on the car purchase price (to the luxury car limit) or on running costs bought through the lease. |
| EV FBT exemption | Eligible electric and plug-in hybrid vehicles under the fuel-efficient luxury car threshold can be exempt from Fringe Benefits Tax — a large saving that has made EV novated leases very popular. |
| Everything bundled | Finance, rego, insurance, servicing, tyres and fuel or charging can sit in one regular payment. |
| No deposit needed | Most novated leases start with no upfront lump sum. |
The cons
| Drawback | What to watch |
|---|---|
| You need to stay employed | The deal is tied to your salary. Change jobs and the lease usually has to be re-novated with your new employer or converted to a standard loan. |
| Residual at the end | There is a set final value to pay, refinance or trade against at lease end — plan for it. |
| Not always cheaper for everyone | The benefit depends on your income, the car, and the kilometres you drive. Lower earners or cheap or older cars can see smaller gains. |
| Employer must offer it | Your workplace needs to allow salary packaging with a provider. |
| Less flexible than owning | Early exit can be costly, and packaged running-cost budgets need to be estimated up front. |
Worked example
Consider a $45,000 EV on a 5-year novated lease. Because eligible EVs under the threshold can be FBT-exempt, a mid-income earner may package the whole cost — finance plus running costs — largely from pre-tax salary, often saving several thousand dollars a year versus a post-tax car loan. The exact figure depends on your salary, the car and your kilometres, so treat this as a general illustration, not a quote or tax advice.
Novated lease vs car loan
If you are employed, want a new-ish car (especially an EV), and your workplace offers packaging, a novated lease is worth pricing. If you are self-employed, between jobs, or buying an older or cheaper car, a straightforward car loan or a business car finance structure is often simpler. Our novated lease vs car loan comparison goes deeper, and the electric car novated lease guide covers the EV angle.
Novated lease FAQs
Is a novated lease worth it?
It can be, especially for employed people leasing an eligible EV, because of the FBT exemption and GST savings. The benefit shrinks for lower incomes, cheaper cars, or low annual kilometres. Price it against a normal loan before deciding.
What happens if I change jobs?
The lease travels with you: you re-novate it with your new employer if they offer packaging, or convert it to a standard finance arrangement in your own name until you do.
Do I own the car at the end?
Not automatically. At lease end you pay the residual to own it, refinance that amount, or trade the car in and start again.
Are electric cars really FBT-free?
Eligible battery-electric and plug-in hybrid vehicles under the fuel-efficient luxury car threshold can be FBT-exempt, which is a significant saving. Eligibility rules apply and you should check specifics with your accountant.
Can I get a novated lease through Alpha390?
Yes. We facilitate novated leasing through a specialist salary-packaging partner and help you compare it against a car loan so you pick the better-value path.
Weigh it up with us
Enquire about a novated lease and we will compare it against a car loan for your situation, or read novated lease vs salary sacrifice first.
Novated leasing is facilitated by Alpha390 through a specialist salary-packaging partner. This article is general information only and does not constitute credit, financial or tax advice; FBT, GST and tax outcomes depend on your circumstances — confirm with your accountant. Alpha390 Finance operates under Australian Credit Licence 506065 (Five Tees Pty Ltd). Lending and leasing are subject to approval, criteria, terms, conditions and fees. Figures are indicative examples only and subject to change.
Written and reviewed by the Finance Director at Alpha390 Finance.
