With all the excitement around electric vehicles (EVs) these days, you may wonder if a novated lease or salary package on a traditional petrol or diesel vehicle is still worth it. But here’s the good news—ICE (internal combustion engine) vehicles continue to provide excellent value and flexibility for Australians who aren’t yet ready to make the EV leap.
Novated leasing has been a fantastic benefit for over 35 years, though it’s one of the most misunderstood perks that company employees have. With recent government incentives, like the Fringe Benefits Tax (FBT) exemption for EVs, it might seem like ICE vehicles are taking a back seat. However, there are several solid reasons why a petrol or diesel car might be the right choice for your novated lease or salary package.
Why Choose a Petrol or Diesel Vehicle for Your Novated Lease?
Not everyone’s lifestyle or needs match what an electric car can offer, and that’s okay. Many people still find traditional vehicles more practical. Here’s why:
- Lifestyle and Vehicle Choices
- If you need a vehicle for towing, off-road adventures, or heavy-duty work, ICE cars, particularly diesel-powered ones, have you covered. A powerful dual-cab ute, for example, offers durability and range that EVs can struggle to match at this stage.
- Large families often require seven-seat SUVs, and while EVs like the Kia EV9 are emerging in this space, they’re priced at the high end. For many, a petrol or diesel SUV simply makes more sense budget-wise.
- Savings That Make Sense for All
- Sure, the FBT exemption provides savings on electric vehicles, but that doesn’t mean a petrol or diesel car won’t save you money on a novated lease. By leasing a traditional ICE vehicle through salary packaging, you’ll still enjoy substantial tax savings, and more of your pre-tax income stays in your pocket.
- Novated leasing bundles all vehicle expenses—fuel, maintenance, insurance, and more—into one regular payment. So you know exactly what’s coming out of your pay, with no hidden expenses when it comes to your car.
- Fuel and Infrastructure Convenience
- With a petrol or diesel vehicle, you don’t have to worry about charging infrastructure or finding a charging station on a road trip. Refuelling is quick and accessible, which is still a big advantage for many.
- EV charging options are expanding but can still be limited in certain regional areas of Australia. If you’re someone who drives long distances or lives outside major cities, the reliability of traditional fuel sources can make life much easier.
- The Ideal Choice for Second Cars
- If you’re looking at novating a second car, perhaps for a growing family, a small petrol hatch like the Toyota Corolla or Kia Picanto offers a budget-friendly, low-maintenance option.
- Not every household is ready to commit to a fully electric setup. An ICE vehicle allows you the flexibility to experiment with a second car without changing your primary mode of transport.
What Exactly Is a Novated Lease?
A novated lease is a special arrangement where your car expenses—finance payments, running costs, and even maintenance—are covered through your pre-tax salary. This reduces your taxable income, putting more money back into your take-home pay. The cost of owning and running your car is deducted before tax, making the novated lease option a smart way to purchase a new vehicle without dipping into cash savings or redrawing on your home loan.
It’s also known as salary packaging because the cost of the car and its upkeep are part of your total pay package. The best part? You won’t face unexpected costs. With all maintenance, fuel, insurance, and even registration rolled into a single monthly fee, you’re not caught off guard when it’s time to service the car or renew your insurance.
Why Petrol and Diesel Vehicles Are Still a Good Fit for Salary Packaging
- Great Range of Vehicles
- With novated leasing, you get to pick the car that suits your needs best. ICE vehicles are plentiful and come in a broad variety of models and price points. Whether you’re after a ute, SUV, or small sedan, there’s something for everyone.
- While electric cars are becoming more diverse, they still don’t offer the same variety in specific segments. If you need a vehicle with a unique capability—like towing capacity, higher payloads, or off-road handling—an ICE car is often your best bet.
- Cost Efficiency
- Don’t be fooled by the focus on EVs. Petrol and diesel vehicles still offer excellent value when novated. They’re generally less expensive to buy upfront, and their depreciation can be slower than that of EVs, which means you might see better resale values.
- By spreading costs across a novated lease, you can better manage your budget. Every expense is accounted for upfront, so you avoid the “bill shock” when it’s time for a big service or tyre replacement.
- The Benefit of Predictable Running Costs
- Novated leases are like an all-in-one budget plan for your car. With fuel, maintenance, insurance, and depreciation costs covered in your monthly fee, you can drive knowing that everything is already accounted for.
- This approach lets you know exactly how much comes out of your take-home salary each payday, reducing financial surprises.
- Peace of Mind and Flexibility
- Many employers understand that not everyone is ready to move to an EV. With a novated lease, you get flexibility with your vehicle choice and the financial predictability of regular payments.
- A novated lease can be tailored to suit your needs, whether that’s a short-term lease or a longer term for a new model. And with more affordable fuel options and service availability nationwide, ICE vehicles offer peace of mind for many drivers.
FBT and the Electric Car Discount: What’s the Hype?
The government introduced the electric car discount to encourage Australians to adopt low-emission vehicles, waiving FBT on eligible EVs. This has undoubtedly made EVs attractive, especially for companies looking to reduce their carbon footprint. But it’s important to remember that not everyone wants or needs an EV just yet.
For some, ICE cars will continue to make sense until EV technology, infrastructure, and range catch up with what Australians need. The FBT exemption doesn’t mean ICE vehicles are obsolete; it simply highlights an option for those ready for it.
Why a Petrol or Diesel Car Might Suit You
If you’re not yet ready to jump on the electric bandwagon, you’re not alone. Only about 40% of novated leases are currently for EVs, meaning the majority are still choosing traditional vehicles. Here’s why a petrol or diesel car could be your best fit:
- Ease of Fueling and Maintenance: Petrol and diesel stations are everywhere, and servicing is straightforward and widely available. You won’t need to map out charging stations or worry about range.
- Versatility in Models and Price Ranges: With many manufacturers focused on affordable and versatile ICE models, you can find a vehicle that fits your budget and lifestyle with ease.
- Practicality for Long Distances: If your lifestyle involves long drives or you live in an area where charging stations are few and far between, an ICE vehicle remains a practical and convenient choice.
Final Thoughts: Still a Great Time for ICE Vehicles
While EVs are gaining traction and incentives are encouraging adoption, traditional petrol and diesel vehicles offer proven, reliable benefits for novated leasing. With a predictable payment setup, flexibility in car choice, and no need for charging infrastructure, an ICE vehicle on a novated lease is still a top choice for many Australians.
Whether you’re after a workhorse ute, a seven-seat SUV, or an affordable sedan, a petrol or diesel vehicle remains a sound investment through novated leasing. So, if an EV isn’t quite right for you now, remember that an ICE car can still save you money, reduce tax, and provide a worry-free driving experience with predictable costs along the way.
