Electric vehicle novated leasing

Love the idea of an eco-friendly EV but hate the price? This could be your solution.

Key takeaways

  • Novated leasing an electric vehicle works the same way as any novated lease, but there can be even more tax benefits.
  • Electric vehicles are exempt from fringe benefits tax and have a higher luxury car tax threshold.
  • Novated leases come out of the employee's pre-tax salary, which means they pay less income tax.

What is a novated lease?

A novated lease is a form of salary sacrificing. You get to lease a car and pay for it through your pre-tax salary. It involves an agreement between yourself, your employer and the leasing company.

Your employer agrees to pay for the leasing costs directly and they then recoup the costs from your salary. But because it comes from your pre-tax salary you end up paying less tax.

What are the benefits of novated leasing an electric vehicle?

For the employee

  • Cost and tax benefits. If you've been nervous about the cost of an electric vehicle, this is a cost-effective option which also saves you money on tax! You may also benefit from corporate fleet discount programs that can reduce the retail price of a vehicle.
  • Easy loan management. With the payments coming out of your salary before you even see it, you don't have to worry about managing the costs yourself.
  • Access to EVs. An electric vehicle can seem out of reach for many but with novated leasing it is a realistic option.
  • After-lease sale benefits. Depending on whether you own the car at the end of the lease agreement, if you sell your vehicle after the lease is up, any profit from the sale will be tax-free.
  • No usage restrictions. There are no limitations on the way you use the vehicle, and you can use it for business or personal use as much as you like.

For the employer

  • No fringe benefits tax. Electric vehicles and their associated costs are exempt from fringe benefits tax (FBT)! They also have a higher luxury tax threshold.
  • A way to offer incentives. A novated lease is a way to incentivise employees with little expense to your business.
  • Limited risk. You won't be responsible for the vehicle if your employee leaves before the lease is up.
  • Not attached to the business. Novated leases are not considered an asset or liability of the business.
  • You don't need to arrange a company fleet. Novated leases are a way for your employees to access discounted vehicle leasing through your company without the burden of your business managing a company fleet.

Tax benefits for electric vehicle novated leasing

Novated leasing in general has tax benefits in that it reduces the amount of income tax the employee pays. Because the repayments come out of the employee's pre-tax salary, the taxable income is reduced. You may even find that the lease payments end up bringing you down into the next tax bracket!

When you lease an electric vehicle, there are further tax benefits and not just for the employee. Electric vehicles are exempt from fringe benefits tax (FBT). Normally, a benefit like novated leasing is a 'fringe benefit'. This is a non-monetary benefit that the employer gives the employee, but they still need to pay tax on. With electric vehicles, the employer doesn't need to pay FBT.

Electric vehicles also have a higher threshold when it comes to luxury car tax. This means that for the financial year 24/25 there is no luxury tax to be paid on EVs worth less than $89,332.

What electric vehicles are available?

The vehicles available will depend on the leasing company you go through. But as a general overview, and only looking at those vehicles that fall under the $89,332 luxury tax threshold, here are some EVs you might find on offer:

  • BMW iX1
  • BYD Atto 3
  • BYD Dolphin
  • BYD Seal
  • Cupra Born
  • Fiat 500e
  • Hyundai Kona Electric
  • Hyundai Ioniq 5
  • Hyundai Ioniq 6
  • Kia Niro Electric
  • Kia EV6
  • MG 4
  • MG ZS EV
  • Mini Electric
  • Nissan Leaf
  • Polestar 2
  • Renault Megane E-Tech
  • Tesla Model 3
  • Tesla Model Y
  • Volvo C40 Recharge
  • Volvo XC40 Recharge

Fully maintained vs non-maintained novated leases

With a fully maintained novated lease you'll not only pay for the cost of the car through your pre-tax salary, you'll pay for the maintenance costs as well. That includes servicing, maintenance and insurance. The good news here is that you'll save even more on income tax. But remember, you'll lower your income even further.

A non-maintained novated lease is where your pre-tax salary is only used to pay for the lease of the car and no other costs. You'll need to use your take-home income to pay for those additional costs, but it may mean you can shop around and get a better deal on those costs.

What happens to your electric vehicle at the end of the lease?

What happens with your electric vehicle after your lease ends depends on the lease agreement. You don't necessarily end up owning the vehicle, but in some circumstances you can make a balloon payment to buy the car. Then, you can choose to keep it or sell it.

If buying the car isn't an option or you decide not to, the lease will end. You may then want to start a new lease option, but that's between the employer and employee.

In either scenario, until you actually 100% own the car you should not make any modifications to the car and ensure it is kept in good condition. If you need to end the lease and return the car for any reason you could be charged extra.

Frequently asked questions

Rebecca Pike's headshot
Written by

Senior Money Writer

Rebecca Pike is Finder’s senior money writer, with over 10 years of experience in mortgages and personal finance. A frequent TV and radio commentator, she frequently appears on Sunrise, A Current Affair, 9News, and Sky News, and contributes expert analysis to publications like Yahoo Finance and The Latch. Rebecca previously served as Editor of Mortgage Professional Australia. She has a Master’s degree in Journalism as well as ASIC-recognised certifications in Tier 1 Generic Knowledge and Tier 2 General Advice Deposit Products, which comply with ASIC guidelines. See full bio

Rebecca's expertise
Rebecca has written 207 Finder guides across topics including:
  • Home loans
  • Cost of living
  • Budgeting

Ask a question

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms Of Service and Finder Group Privacy & Cookies Policy.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

More guides on Finder

  • Novated leasing for Teslas

    Drive away with a Tesla model through novated leasing and enjoy the tax benefits. Electric vehicles are exempt from Fringe Benefits Tax and have a higher luxury tax threshold.

  • Bank Australia Car Loan

    Concerned about the earth but still need a car to get you around? The Bank Australia Car Loan comes with a competitive rate and trees will be planted to offset the greenhouse gas emissions produced by your car for the term of your loan.

  • Car loans for classic cars

    Want to buy a classic car but don't have the ready money? There are still financing options available for classic vehicles. Find out what loans you have to choose one and which one will work best for you.

  • Rent an Uber car in the Gold Coast

    There's a way you can drive with Uber without using your own car – find out how.

  • Rent a car for Uber in Canberra

    Find out how you could rent a car to drive with Uber in Canberra

  • How do you sell a car under finance?

    Read the guide on how to sell an encumbered vehicle to find out the extra steps involved.

  • Tesla Superchargers Map: Where you can charge in Australia

    Find out the extent of Australia's Tesla Supercharger network with our complete map of every charging station.

  • Used car loan rates Australia

    You can still get a car loan if you want to finance a used car. Find out how you can get a used car loan and see what rates are available for the used car you want. Learn how to best compare lenders and apply for your loan today.

  • New Car Loan Interest Rates

    Whether you're upgrading your current car or looking for a new vehicle for your first car purchase, a new car loan can help you finance your set of wheels. Find out everything you need to know about new car loans to help you find the right loan for you.

Go to site
Compare your car loan options in seconds
0d, 0hrs, 0m - 73% predict RBA rate cut
Attention! Bank rates have changed
FIND OUT MORE