Novated lease calculator
This novated lease calculator estimates the real cost of leasing a car through your salary in Australia. It works out the lease payments and running costs, splits them between pre-tax and after-tax pay, and shows what the car costs you each year and fortnight for an FBT-exempt electric car or a petrol, diesel or hybrid car.
Updated 12 November 2026 · Uses 2026-27 figures
Work out your novated lease cost
Enter the car price, car type, lease term, interest rate, running costs and your salary.
General information only, not financial, tax or legal advice. Results are estimates based on 2026-27 figures and the assumptions shown. Check your award, agreement or a qualified adviser for your situation.
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Find workHow to use the novated lease calculator
- Enter the car drive-away price including GST.
- Choose the car type: an eligible electric car (FBT exempt) or a petrol, diesel or hybrid car.
- Pick the lease term in years and enter the interest rate from your quote.
- Add yearly running costs for rego, insurance, energy or fuel, tyres and servicing.
- Enter your salary and read the real yearly and fortnightly cost, and the residual you owe at the end.
How does a novated lease work?
A novated lease is a three-way agreement between you, your employer and a finance company. The finance company leases you the car. Your employer takes the lease payments and running costs out of your pay and sends them to the lease provider. Because some or all of the cost comes from pre-tax salary, your taxable income falls.
GST is not charged on the purchase price up to the luxury car tax limit or on running costs, so the calculator works with GST-exclusive amounts. At the end of the term you pay a residual (balloon) amount, then keep the car, sell it or trade it in on a new lease.
| Lease term | ATO minimum residual |
|---|---|
| 1 year | 65.63% |
| 2 years | 56.25% |
| 3 years | 46.88% |
| 4 years | 37.50% |
| 5 years | 28.13% |
Electric cars versus petrol: the FBT difference
A car provided through a novated lease is a fringe benefit. For most cars, fringe benefits tax is removed by the employee contribution method: you pay 20% of the car's cost each year from after-tax salary, and the rest of the costs come from pre-tax salary.
Eligible zero or low emissions cars are exempt from FBT, so the whole lease and running costs can come from pre-tax salary. To qualify, the car must be a battery electric or hydrogen fuel cell vehicle first used on or after 1 July 2022 and priced below the luxury car tax threshold for fuel-efficient cars, which is $91,661 for 2026-27. Plug-in hybrids have not qualified for new arrangements since 1 April 2025.
The exempt EV still counts as a reportable fringe benefit. It is not taxed, but it is added to your income for HELP repayments, the Medicare levy surcharge, some Centrelink payments and child support.
Worked example
$55,000 electric car, 3-year lease at 8.5%, $4,500 a year running costs, salary $95,000.
Lease and running costs come to $16,145 a year excluding GST, all paid from pre-tax salary. After the tax saving, the car costs you $10,978 a year, or about $422.24 a fortnight. That is $6,781 a year less than paying the same costs, including GST, from after-tax pay. At the end of the lease you owe a residual of $25,784 (46.88%).
The same car as a petrol model: $10,000 a year must come from after-tax pay under the employee contribution method, so the real cost rises to $14,178 a year and the saving falls to $3,581.
Is a novated lease worth it?
It tends to work best when:
- the car is an eligible electric car, so there is no FBT
- you are on the 30% tax rate or higher
- you drive enough that running costs are a large part of the total
- you plan to keep the job for the length of the lease, or know what happens to the lease if you leave
It suits you less if your income is low, if the lease fees and interest rate are high, or if a cheaper car bought outright would meet your needs. Compare at least two quotes, ask for the interest rate and all fees in writing, and check what happens if you change employers. A novated lease usually moves with you only if your new employer agrees to it; otherwise you pay it from after-tax income.
What happens at the end of a novated lease?
You pay the residual and own the car, refinance the residual over a new lease, or sell or trade the car and use any equity towards your next lease. The residual is set by the ATO minimum for the term, so a shorter lease means a larger final payment. Budget for it from the start.
Frequently asked questions
What is a novated lease?
It is a car lease between you, your employer and a finance company. Your employer pays the lease and running costs from your salary, partly or fully before tax, which lowers your taxable income. You pay a residual at the end of the term to keep the car.
Is a novated lease worth it?
Often for eligible electric cars, because they are exempt from fringe benefits tax and all costs can come from pre-tax pay. For petrol cars the saving is smaller because 20% of the car's cost must be paid from after-tax salary. Check fees and the interest rate before signing.
Do you own the car at the end of a novated lease?
Not automatically. You own it after paying the residual amount set at the start of the lease. You can also refinance the residual or sell the car and use the proceeds to settle it.
Does a novated lease reduce taxable income?
Yes. Lease payments and running costs taken from pre-tax salary reduce your taxable income. For an FBT-exempt electric car the car is still a reportable fringe benefit, which counts for HELP, the Medicare levy surcharge and some government payments.
Can you novated lease a used car?
Yes, most providers lease used cars, although age limits apply. A used electric car can only be FBT exempt if it was first held and used on or after 1 July 2022 and is under the luxury car tax threshold for fuel-efficient vehicles.
Can anyone get a novated lease?
You need to be an employee and your employer has to agree to offer novated leasing through payroll. Contractors on an ABN and many casual employees cannot use one, though some employers offer it to long-term casuals.
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Sources and assumptions
General information only, not financial, tax or legal advice. Results are estimates based on 2026-27 figures and the assumptions shown. Check your award, agreement or a qualified adviser for your situation.