How Much Can I Save With a Novated Lease?

Understanding your novated lease savings

A novated lease doesn’t just make it easier to get into a new car - it can also help you save money in ways a traditional car loan can’t.

When you set up a novated lease through your employer, the lease payments and running costs - like fuel, servicing, registration, insurance and even tyres - are bundled into your salary package. Because many of these costs are deducted from your pre-tax income, you reduce your taxable income, which can lead to noticeable income tax savings over the life of your lease.

These potential savings are even more significant when you consider the convenience of a fully maintained novated lease. With all your car running costs covered in one predictable payment, there are fewer surprises - and less strain on your budget.

Of course, every lease is different. Your actual novated lease savings will depend on things like your income, the purchase price of the car, how much you drive, and how your employer’s packaging policy is set up. That’s why we always recommend using our novated lease calculator to get a clearer picture of your potential tax savings.

What factors affect how much you save?

While a novated lease offers great value for many Australians, your exact tax savings will depend on a few key factors.

Your Salary

Because lease payments and vehicle expenses are deducted from your pre-tax income, a higher income can often lead to greater income tax savings. Reducing your taxable income means paying less income tax overall.

The Purchase Price of the Car

The cost of the vehicle you choose will affect your lease payments and the total value of your novated lease arrangement. Higher-value vehicles may also attract additional costs, such as fringe benefits tax (FBT) or the luxury car tax threshold, which can influence your total savings.

Lease Term and Residual Value

How long you lease the vehicle (typically 1 to 5 years) and the agreed residual value at the end of the term play a role in determining your regular lease payments. These elements are part of your formal lease agreement and are important when calculating affordability and long-term savings.

Running Costs and Usage

With a novated lease, you package all the running costs — including servicing, insurance, registration, and fuel — into your salary package. The more you drive, the more value you typically get from this structure. These car running costs would otherwise come out of your post-tax income if you owned the car outright or had a regular car loan.

Your Employer’s Salary Packaging Policy

Every employer works with a finance company to tailor their salary packaging offering. The specific policy can impact what’s included in your lease and how payments are structured — which in turn affects your novated lease savings.