Novated leasing has long been a popular and tax-effective way for Australians to finance a new car. But since the introduction of the Electric Car Discount Bill in 2022, which provides a Fringe Benefits Tax (FBT) exemption for electric vehicles (EVs) and eligible plug-in hybrid electric vehicles (PHEVs), novated leasing has become even more attractive—especially for those considering the switch to an EV.
Why Choose Novated Leasing?
A novated lease allows employees to lease a car using their pre-tax income, effectively reducing their taxable income and offering potential savings. It’s a three-way agreement between you, your employer, and a leasing company. Payments are deducted directly from your salary, making the process seamless and hassle-free.
One of the biggest advantages? Savings. Since payments are made from pre-tax income, you’ll likely see more money in your pocket each month compared to buying a car outright or using traditional finance options. Plus, GST is not charged on the vehicle purchase price, adding another layer of savings.
The FBT Exemption—A Game Changer for EVs
The introduction of the FBT exemption has significantly boosted the popularity of novated leasing for electric vehicles. This exemption applies to eligible EVs and PHEVs (delivered before March 31, 2025), eliminating a major cost associated with novated leasing. Without FBT, the overall lease cost is drastically reduced, making EVs a financially sound choice.
To illustrate, consider the Peugeot 308 petrol and its electric counterpart, the e-308. While the petrol model has a lower upfront cost, the novated lease for the e-308 comes out cheaper on a fortnightly basis because of the FBT exemption. The result? An estimated saving of over $31,000 over five years for the EV lease compared to the petrol model#.
Frank Agostino, CEO of Paywise, highlighted the strong demand for novated leasing throughout 2024, particularly driven by tax incentives and the increasing appeal of electric vehicles.
“Demand for novated leasing remained strong throughout 2024. The FBT exemption had already begun to show significant benefits towards the end of 2023, so to see continued growth throughout 2024 was particularly impressive.”
According to Agostino, Paywise novated leased deliveries increased by 18% YOY, reflecting growing adoption across various industries and the total value of financed vehicles rose by 17% YoY, showing that more employees are leveraging tax benefits to secure higher-value vehicles.
“The EV FBT exemption drove higher engagement, with many employees actively comparing novated leasing against traditional financing options.”
Agostino further noted that while the FBT exemption was a significant driver of demand, other factors also played a crucial role.
“The FBT exemption was a major driver, but it wasn’t the only factor. EV deliveries showed continued year-over-year growth, with an increasing proportion of mid-income earners now engaging in novated leasing.”
“Marketing efforts across the industry have helped increase consumer interest, as seen in higher lead volumes and engagement rates from employers promoting leasing as part of their benefits strategy.”
“Higher interest rates will keep affordability a major focus, leading more people to seek ways to reduce their financial burden. Novated leasing provides a key advantage in this environment, as the tax savings and bundled running costs make vehicle ownership more affordable compared to traditional financing.”
Rising Demand for EVs through Novated Leasing
The FBT exemption has sparked immense interest in both novated leasing and electric vehicles. Industry sources confirm that over 50% of new cars acquired through novated leases in 2024 were electric, and the demand continues to rise. With cost savings, reduced environmental impact, and government incentives, it’s easy to see why more Australians are making the switch.
EVs also offer lower running costs. A Hyundai Kona Electric, for instance, costs as little as $4.44 to travel 100 kilometres when charged at home using grid electricity, compared to $12.47 for its petrol variant. Factor in the tax savings from novated leasing, and the cost per kilometre drops even further.
Bundled Costs and Hassle-Free Driving
Another standout benefit of novated leasing is the all-inclusive monthly payment. This covers not only the lease but also fuel (or charging costs), insurance, registration, servicing, tyres, and even maintenance. It simplifies budgeting—no more scrambling for funds when it’s time for a major service or rego renewal.
And for those thinking about accessories, number plates, or even a public charging cable for their EV, these can also be bundled into the lease, spreading the cost over the lease term.
Ready to Make the Switch?
With the significant tax savings, the FBT exemption for EVs, and the ease of salary packaging, novated leasing is an incredibly smart and cost-effective way to drive a new car—especially if you’re eyeing an electric vehicle.
Curious about how much you could save? Get a novated lease quote today and see how affordable driving a new (and possibly electric) car can be. It might just feel like a pay rise!
Find out more by reading the 2025 Novated Leasing Guide.
