Novated lease vs. Car loan
What’s the smarter way to drive a new car? Call 1300 476 278 for a novated leasing quote.
Understanding novated leasing vs. traditional car loan
A novated lease is a three-way agreement between you, your employer, and a finance company, with a company like Smart doing the legwork for you. You choose the car you want, and your employer makes the lease payments, which includes your running costs, using a portion of your pre-tax salary. This could lead to big income tax savings.
A traditional car loan on the other hand is paid for using only your post-tax income and does not give you the same income tax savings.
The key differences between
a novated lease vs. car loan
Trying to decide which option gives you more value over time and the greatest convenience?
Here’s how novated leasing with Smart™ stacks up against traditional car finance.
|
Considerations |
Novated Lease |
Traditional Car Loan / Finance |
| Upfront cost | Low, no lump sum needed |
Deposit often required |
| Tax Benefits | Payment made from pre-tax salary |
No income tax benefits |
| Budgeting Ease | One regular payment with usual car expenses included |
Multiple bills |
| Running Costs | Includes rego, insurance, servicing and maintenance |
Paid separately at different and often unexpected times of the year |
| Vehicle Choice | You choose – new or used* |
You choose – new or used |
| Personal Use | Yes, car can be for 100% personal use |
Depends on the agreement |
| Admin & Paperwork | Managed for you by Smart & your employer |
You manage everything |
| Flexibility to Upgrade your Car | Often easier to upgrade at end of lease |
Depends on loan terms |
| This comparison table is intended as a general guide only and does not constitute financial advice. | ||
Wondering how a novated lease compares to buying a car outright with cash?
Buying outright ties up your cash and means you miss out on the tax savings you could achieve with a novated lease.
A novated lease can let you keep your money working elsewhere, reduce your taxable income and cover running costs in one convenient, regular payment.
Comparison in action: Novated lease vs loan costs over 5 years
To show how much you could save, let’s look at a real-world example. Based on a Tesla Model Y Rear wheel with an RRP of $64,120 we compared the totals costs of a novated lease versus a traditional car loan over a 5-year term. The Tesla Model Y is eligible for a Fringe Benefits Tax exemption on a novated lease~.
The result? The novated lease came out $28,504 cheaper - and that includes running costs like insurance, registration, servicing and maintenance.
This example highlights how bundling expenses and accessing pre-tax benefits can lead to significant savings over time.
