Compare the true cost of buying outright, taking a car loan, or getting a novated lease — including tax savings, FBT, running costs and the opportunity cost of your money. Free, no sign-up, no email.
Most people already understand buying outright or financing. The third option trips everyone up — here's the plain-English version.
A novated lease is a three-way agreement between you, your employer, and a leasing company. Your employer pays for the car (lease payments plus running costs like fuel, insurance, rego and servicing) directly from your salary before tax is taken out. That lowers your taxable income, so you pay less income tax.
Because the car is also available for private use, the government applies Fringe Benefits Tax (FBT). In practice this is offset by paying a portion of the cost from your after-tax pay (the "Employee Contribution Method"), which cancels the FBT out. The upshot: you bundle all your car costs together, pay for a lot of it pre-tax, and save on income tax and GST.
At the end of the lease you owe a final lump sum — the residual or "balloon" — to actually own the car (a percentage set by the ATO based on the lease length).
The catch: you need to be an employee whose workplace offers salary packaging, you're locked into a term, and you must budget for that residual at the end. It shines brightest for electric vehicles, which are currently FBT-exempt — making novated leasing dramatically cheaper than the alternatives.
Buy outright: pay the full price up front from your savings. No interest, no repayments — but a big chunk of cash is tied up in a depreciating asset instead of earning a return (the "opportunity cost" this calculator accounts for).
Car loan: borrow the money and repay it with interest over a set term. Keeps your cash free to invest, but you pay for the privilege. A loan only beats buying outright if your money would earn more invested than the loan's interest rate.
It depends on three things: your income (higher earners save more, because the pre-tax deductions are worth more), whether it's an EV (the FBT exemption is a game-changer), and your running costs (bundling fuel, insurance and servicing pre-tax adds up). For a petrol car on a modest salary, a plain loan can win. For an EV, or a higher earner with decent running costs, novated usually comes out well ahead. That's exactly what this calculator is for — plug in your own numbers.
It's the lump sum you owe at the end of a novated lease to actually own the car. The ATO sets a minimum residual as a percentage of the car's price, based on the lease length — roughly 65.63% for 1 year down to 28.13% for 5 years. You can pay it out, refinance it, or sell the car to cover it and trade up. Always budget for it — it's the part people most often forget.
Eligible EVs and plug-in hybrids priced under the luxury car tax threshold for fuel-efficient vehicles are currently exempt from Fringe Benefits Tax. That means the entire lease can be packaged from your pre-tax salary with no FBT to offset — a large saving that petrol and diesel cars don't get. It's the single biggest lever in the whole calculation.
Every dollar you tie up in a car — or pay in interest and fees — is a dollar that could have been invested and earned a return. This calculator counts that lost return as a real cost, which is why buying outright isn't automatically "free". You can set your own expected return rate and choose compound or flat interest to see how sensitive the result is.
Not necessarily, but it helps. The savings come from deducting costs before tax, so the higher your marginal tax rate, the bigger the benefit. On lower incomes the advantage shrinks — and for an FBT-exempt EV it can still stack up even on a modest salary. Run your actual income through the calculator to see where you land.
We estimate your annual fuel/charging, servicing, tyres, insurance and rego from three things you tell us: kilometres per year, fuel type and car size — the same inputs a novated lease provider asks for. Higher km means more fuel, faster tyre wear and more frequent servicing. Bigger cars use more fuel and cost more to insure and service. EVs are notably cheaper to run (cheap charging, minimal servicing), which is a big part of their appeal.
These use indicative Australian averages, so treat them as a starting point. If you know your real numbers, switch the running-costs mode to "I'll enter my own total" and type them in. You can also fine-tune fuel and electricity prices in the Advanced panel.
Fuel is the biggest swing — a thirsty large SUV can use double the fuel of a small hatch, and diesel and electricity are priced very differently to petrol. Servicing also varies widely by make and model: some brands have capped-price servicing while others are expensive, and EVs skip oil changes and many wear items entirely. Tyres scale with how far and how hard you drive, and insurance depends on the car's value, safety and repair costs. Because of all this, our estimate is a reasonable average — your actual costs could be higher or lower, so use the manual option if you have real quotes.
They're a solid estimate using current FY2025–26 tax settings and simplified, transparent models — good for comparing the three options side by side. Real novated lease quotes vary by provider, and things like establishment fees, exact interest rates and your employer's packaging policy can shift the numbers. Always confirm with a licensed adviser or accountant before committing.
Estimate only — not financial advice. Figures use FY2025–26 tax settings and simplified models. Novated lease costs vary by provider; always confirm with a licensed adviser or accountant before deciding.