The core difference
With a car loan you pay for the car and everything it needs with money that has already been taxed. With a novated lease the lease payment comes out before tax, which lowers your taxable income, and you avoid GST on the car (up to the $6,353 cap) and on the running costs.
What a novated lease adds
- Paid from pre-tax salary, lowering your taxable income
- No GST on the car purchase or the running costs
- Insurance, servicing, tyres, rego and fuel or charging bundled into one payment
- On an eligible EV, no FBT as well
Who each suits
A car loan can suit someone whose employer does not offer salary packaging, or who wants to own the car outright with no residual. A novated lease usually wins for employed people with a willing employer, and the margin is largest on an eligible electric vehicle.
Common questions
Is a novated lease cheaper than a car loan?
For most employed people, yes, because the payments are pre-tax and you avoid GST. The exact difference depends on your salary and car. Run both on the calculator to compare.
Do I own the car at the end?
At the end of a novated lease there is a residual value to pay if you want to keep the car. You can pay it out, refinance it, or start a new lease. Your quote shows the residual up front.