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Money Decisions AU
Updated for 2026

Novated Lease Calculator Australia

A novated lease can reduce your taxable income, but it doesn't always mean you save money. This calculator helps you compare the real cost of a novated lease versus buying a car outright or using a loan.

How a Novated Lease Works

A novated lease is a three-way agreement between you, your employer, and a finance company. Your employer takes the lease payments out of your pre-tax salary (a form of salary sacrifice), which can reduce your taxable income. The car is in your name, but your employer pays the lease and bundled running costs on your behalf.

  • Lease payments come out of pre-tax income.
  • Your employer must agree to administer the lease.
  • You may pay less income tax, but FBT and lease fees apply.

When a Novated Lease Makes Sense

  • You are a higher income earner.
  • You are on a high marginal tax rate (typically 30%+).
  • You have stable employment for the full lease term.
  • You drive enough kilometres to make bundled running costs worthwhile.

When It Might Not Be Worth It

  • You earn a lower income or sit in a low tax bracket.
  • Lease fees and management costs are high.
  • You may change jobs or sell the car within a short period.
  • You can buy outright with cash and avoid finance costs altogether.

Example Calculation

Car price: $50,000

Loan: 5 years at 7.5%

Running costs: $6,000 / year

Marginal tax rate: 37%

Loan path — total cost ≈ car price + interest + 5 years of running costs.

Novated lease path — same outlay, reduced by an estimated tax saving at your marginal rate.

The result depends heavily on your tax rate and lease fees.

FAQ

Is a novated lease worth it in Australia?+

It depends on your salary, tax rate, and costs.

Do you save tax with a novated lease?+

You may reduce taxable income, but total cost must be compared.

Can I pay less than a car loan?+

Sometimes, but not always.