Your Employer Offers a Novated Lease. Here's What It Actually Costs vs a Car Loan.
A novated lease can save thousands in tax — or cost you more than a standard car loan, depending on whether your car is an EV, your salary, and what ECM contributions your employer requires. This calculator puts both options side-by-side so you can see the real net cost of each, after tax.
Who this calculator is for
- Employees whose employer offers salary packaging, weighing up using it for a car purchase.
- Buyers choosing between an EV and a non-EV who want to understand the FBT exemption's dollar value.
- Anyone comparing their novated lease quote against a direct car loan offer.
- Higher-income earners (above $120,000) where salary sacrifice yields the largest marginal tax saving on EVs.
What it calculates
- Estimated monthly pre-tax salary sacrifice and net cost after tax.
- Monthly car loan repayment for the same vehicle and term.
- Dollar saving (or cost) per month and across the full term.
- Estimated annual tax reduction from salary sacrifice.
- ECM post-tax contribution for non-EV vehicles.
- ATO prescribed residual value payable at lease end.
Why it matters
The headline appeal of a novated lease is that repayments come from pre-tax salary. The catch for non-EVs is the Employee Contribution Method (ECM): a post-tax contribution equal to 20% of the vehicle's base value annually that can wipe out the tax saving on higher-value cars over longer terms. EVs under the LCT threshold are FBT-exempt — the difference between an EV and a non-EV novated lease can be tens of thousands of dollars over a five-year term.
Novated Lease vs Car Loan Calculator
Novated Lease vs Car Loan Calculator
Salary & vehicle
Marginal rate: 32.0%
EVs under $91,387 (LCT threshold) qualify for the FBT exemption — no ECM required.
Running costs & car loan rate
Fuel/charging, rego, insurance, tyres, servicing
Default: 5.09% (green car loan, EV) or 6.49% (standard new car loan).
Novated lease is cheaper
Monthly saving
$365
Total saving over 5 yrs
$21,923
Side-by-side
Tax & lease details
EV FBT exemption applies. Vehicle is below the $91,387 fuel-efficient LCT threshold — no ECM contribution required.
Ready to find a better car loan rate?
Even if a novated lease looks attractive, a competitive car loan can close the gap — and for non-EV buyers, a low-rate car loan can come out ahead. LoanGorilla compares 40+ lenders in minutes so you know which path actually saves you more.
How this calculator works
The calculator models two parallel scenarios for the same vehicle and term, then outputs the net cost difference in real dollar terms.
Novated lease modelling
The pre-tax monthly salary sacrifice is calculated using a standard balloon-payment loan formula. The vehicle's ATO-prescribed residual value is treated as a balloon at lease end — for a three-year term this is 46.88% of the vehicle's base value; for five years it is 28.13%. The calculator uses a notional fleet financing rate of 7% p.a. to derive the monthly sacrifice, consistent with typical novated lease provider rates. If you include running costs, these are added to the pre-tax sacrifice amount (since they come from pre-tax salary under a properly structured novated lease). For non-EV vehicles, the Employee Contribution Method (ECM) is applied: a post-tax contribution equal to 20% of the vehicle's base value annually, divided into monthly amounts, is added to the net cost. For EVs and PHEVs under the LCT threshold, the FBT exemption removes the need for ECM entirely.
Car loan modelling
The monthly repayment is calculated using the standard amortisation formula on the full vehicle purchase price (no residual), at the interest rate you enter, over the same term. Car loan repayments come from post-tax take-home pay — there is no tax deduction. Running costs are also paid post-tax if included.
Tax saving calculation
Your marginal tax rate (including the 2% Medicare levy) is applied to the total pre-tax sacrifice amount to estimate the monthly and annual tax saving. The calculator uses FY2025–26 ATO tax brackets.
Limitations to be aware of
This calculator uses simplified modelling. It does not account for employer administration fees (typically $500–$1,500 per year on novated leases), the time-value of the residual payment, differences in comprehensive insurance between lease and loan arrangements, or the effect of salary sacrifice on superannuation guarantee calculations. Actual novated lease quotes will vary by employer, provider, and vehicle. Use this calculator to understand the direction and rough magnitude of the saving — not as a substitute for a formal novated lease quote.
How to interpret your results
- Positive monthly saving means the novated lease costs you less per month in real terms, after accounting for tax. For EVs, this saving is typically large. For non-EV vehicles, it may be modest — or negative.
- Negative monthly saving means the car loan is cheaper, once the post-tax ECM contribution is added back into the novated lease cost. This is most likely for higher-value non-EV vehicles on longer terms — and is information you won't get from a novated lease provider's marketing.
- Total saving over term reflects the monthly saving multiplied by the number of months. This excludes the residual value, which is exchanged for ownership of the car at lease end.
- Residual value is what you'll owe at the end of the novated lease — the ATO's prescribed minimum residual. You can pay it in cash, refinance it, or roll into a new lease. Budget for this.
- Tax saving shows the annual reduction in assessable income. For a salary of $90,000 sacrificing $800 per month, assessable income drops by $9,600 — saving approximately $3,312 in income tax and Medicare levy at the 34.5% marginal rate.
- FBT saving (EVs): the calculator shows what the equivalent ECM contribution would have been under the standard method — the extra saving the FBT exemption delivers.
Worked example
A $90,000 salary, $42,000 SUV (non-EV), three-year novated lease bundling $500/month in running costs. Monthly pre-tax sacrifice: $1,304. ECM post-tax contribution: $700/month. Net monthly novated cost: $1,554. Equivalent car loan at 6.49% plus $500 running costs post-tax: $1,787/month. Monthly saving: $233. Total saving over three years: $8,392. Residual payable at end of lease: $19,690. Annual tax reduction from salary sacrifice: $5,397. Switch the same scenario to an EV under the LCT threshold and the ECM drops to zero, the net monthly cost falls to around $854, and the monthly saving climbs to $933.
How to get the most from this comparison
- Start with the EV/non-EV toggle first. This is the single biggest variable. If you're considering any EV or PHEV under $91,387, run the EV scenario before you evaluate models and prices. The FBT exemption can deliver $20,000–$40,000 in total savings over a five-year lease.
- Include running costs for a fair comparison. Fuel or charging, insurance, registration, tyres, and servicing are real costs either way. Bundling them into a novated lease means paying them from pre-tax salary. For a driver spending $500/month on running costs, this saves approximately $2,070/year at a 34.5% marginal rate.
- Ask your employer for the administration fee. Novated lease providers charge employers (or employees) annual admin fees of $500–$1,500 that this calculator does not include. Subtract them from your estimated saving.
- Compare the residual value to your exit plan. If you plan to sell the car before the lease ends, a novated lease can be terminated early but penalties apply. If you plan to keep the car, budget for the residual.
- Check your marginal rate is accurate. If you have other income (investments, second job, rental), your actual marginal rate may be higher. Use the manual override to test sensitivity.
- Use a real novated lease quote alongside this calculator. This tool models the mechanics correctly, but your provider's quote may differ due to fleet discounts, GST treatment, or running cost inclusions. Run both in parallel.
Example novated lease vs car loan calculations
Four realistic scenarios — two standard vehicles and two EVs — using the ATO's prescribed residual values, May 2026 rates, and FY2025–26 tax brackets. For non-EV scenarios, the ECM post-tax contribution is included in the net monthly novated cost.
| Salary | Vehicle | Term | Type | Sacrifice/mo | ECM/mo | Net novated | Car loan | Monthly | Total | Residual |
|---|---|---|---|---|---|---|---|---|---|---|
| $80,000 | $35,000 | 3 yr | Non-EV | $670 | $583 | $1,022 | $1,073 | +$51 | +$1,819 | $16,408 |
| $100,000 | $55,000 | 3 yr | EV (FBT exempt) | $1,053 | — | $689 | $1,651 | +$961 | +$34,604 | $25,784 |
| $120,000 | $45,000 | 5 yr | Non-EV | $714 | $750 | $1,218 | $880 | −$338 | −$20,254 | $12,658 |
| $150,000 | $75,000 | 5 yr | EV (FBT exempt) | $1,190 | — | $726 | $1,418 | +$692 | +$41,537 | $21,098 |
Assumptions
- Novated lease modelled at 7% p.a. fleet rate with ATO prescribed residuals (3yr: 46.88%; 5yr: 28.13%).
- Car loan rates: 6.49% p.a. for non-EV, 5.09% p.a. for EV / green car loan.
- Marginal rates: 34.5% for $80k–$120k; 39% for $150k (incl. 2% Medicare levy).
- ECM calculated at 20% of vehicle base value per annum (ATO statutory method).
- No running costs included — bundling running costs into the novated lease typically increases the saving where the lease is already ahead.
- EV scenarios use LCT-threshold-eligible vehicles (under $91,387).
You might also use
- Novated Lease Calculator — model salary packaging mechanics in detail →
- Electric Vehicle Loan Calculator — green car loans, rebates, fuel savings →
- Car Loan Repayment Calculator — model repayments at any rate, term and amount →
- Comparison Rate Calculator — see the true cost once fees are folded in →
- Borrowing Power Calculator — your realistic borrowing capacity for a car loan →
- Refinance Calculator — break-even and total savings from switching car loan →
Calculator assumptions
This calculator produces estimates based on ATO tax brackets for FY2025–26, ATO-prescribed novated lease residual percentages, and the standard statutory FBT method. All figures are in Australian dollars. Rates and thresholds are current as of May 2026. The novated lease model uses a notional fleet rate of 7% p.a. and assumes the Employee Contribution Method (ECM) is applied for non-EV vehicles using the 20% statutory percentage. Individual novated lease arrangements will vary depending on the employer's salary packaging provider, the vehicle's GST treatment, whether the employer's fleet attracts a Type 1 or Type 2 FBT gross-up rate, and any employer administration fees — which are not included here but typically run $500–$1,500 per year. The car loan comparison uses the full drive-away price with no residual (standard amortising loan). This calculator does not constitute financial, tax, or credit advice. Confirm all novated lease details with your employer's salary packaging provider and a registered tax adviser before committing. Reviewed by the LoanGorilla editorial team — last updated May 2026.