A novated lease is a salary sacrifice arrangement where car lease repayments come directly from your pre-tax salary.
The Tesla Model 3 is an electric vehicle available for novated lease and as an electric vehicle it comes with additional tax benefits.
Depending on the terms of your novated lease, it can be much more cost-effective than taking out a car loan.
What is a novated lease?
A novated lease is an agreement between an employee, their employer and a third party leasing company.
The employer arranges a car lease on behalf of the employee. The employer makes the lease payments from the employee's pre-tax income, directly to the leasing company.
This reduces the employee's taxable income.
Why choose a novated lease for the Tesla Model 3?
Taking out a novated lease for a Tesla is a cost-effective way to drive one of Australia's most popular electric vehicles.
Novated leasing can make buying a car a more achievable purchase.
Savings on repayments by using pre-tax income.
Buying an electric car like a Tesla Model 3 means you don't have to pay FBT.
Tesla Model 3 novated lease cost vs buying outright
By sacrificing the novated lease repayments out of the employee's pre-tax salary, it reduces the taxable income of the employee. In doing this, it can cost much less to buy a car this way.
Let's take a look:
Fully maintained novated lease
You're on an annual salary of $100,000, which is a monthly pre-tax income of $8,333.33.
You choose a Tesla Model 3 priced at $54,900 on a 5 year fully maintained novated lease.
Your monthly lease repayments are $1,137.50 a month, which comes out of your pre-tax salary and includes costs like insurance, registration and 1 set of tyres.
Your taxable income is reduced to $7,195.83, which means your take-home pay falls to $5,657.83 a month from $6,431.33.
This means your $1,137.50 lease repayment only reduces your net income by $773.50.
At the end of the lease you can pay a residual value of $17,297 to own the car.
Factoring in all costs and tax savings, the total effective cost to you is $68,217.
Buying a Tesla Model 3 through a car loan
You borrow $54,900 through a 5 year car loan with a personalised interest rate of 9%.
Your monthly repayments, assuming no loan fees, will be $1,140.
This comes out of your post-tax salary, meaning you only have $5,291.33 left.
In total, your car loan will cost you $68,379.
You still need to pay separately for insurance, registration and any repairs or maintenance which would cost thousands more each year.
Who benefits most from a Tesla Model 3 novated lease?
A Tesla Model 3 novated lease is best for someone who wants the savings and benefits of an electric vehicle.
More widely, as with novated leasing any car, it's best for employees with a full-time, permanent and stable job. Casual employees can't take advantage of a novated lease.
Novated leases are also ideally for mid-to-high income earners who can afford the consistent repayments and lower take-home salary. You can use a novated lease calculator to make sure you can afford the repayments.
A novated lease also works best for people who are happy to include all of their fuel and maintenance costs into their novated lease (a fully maintained lease) for even more savings.
Salary sacrifice and tax treatment
Novated lease repayments will come out of the employee's pre-tax salary. This means there's nothing the employee needs to do, the repayments are effectively managed by the employer.
As well as being a logistical benefit, salary sacrificing reduces the employee's taxable income. The biggest benefit of this is that the employee loses less of their take-home income than if they were to make the payments post-tax.
You can lower your taxable income. If you take out a fully maintained novated lease, you'll save even more.
It's a cost-effective and manageable way of buying an electric vehicle.
If you decide you want a different car at the end of the lease period, you can start a new lease without paying the residual value of the previous car.
Cons:
You don't own the car until you've paid the residual value at the end of the lease, so there are restrictions on being able to modify the vehicle.
If you want to own the vehicle at the end of the lease you'll need to pay a one-off residual cost which can be a large financial burden.
You might have less control over where you buy fuel, get your insurance or get your car serviced.
Alternatives to a Tesla Model 3 novated lease
Standard car loan:
You can buy the car by taking out a car loan and making principal and interest repayments.
Dealer finance:
Car dealerships will often have finance options. They might offer lower monthly repayments but you'll still need to pay a residual payment at the end of the term.
Buying outright:
If you have the funds saved up you can simply buy the car in cash! It's a large chunk of money to lose in one go though, so make sure you won't end up with no emergency savings or financial buffer.
Subscription services:
If you're not worried about ever owning the car, you could opt for a car subscription instead. You can borrow a car for a minimum of 30 days and your fees will cover the cost of roadside assistance, comprehensive insurance, and service and maintenance.
FAQs about novated leasing a Tesla Model 3
Yes, the Tesla Model 3 is eligible for novated leasing. As an electric vehicle it's also eligible for FBT exemption.
You'll need to check with your novated lease provider to make sure they offer the Tesla Model 3, but it should be a standard offering.
Once your novated lease term has finished you have a couple of options. One option is to pay the residual value of the car so that you now own the car. Once you've paid for the car and you own it, you can then decide whether to keep the car or sell it.
Another option is that you can start a new lease with a new car. This can still work out as a cost-effective option because you'll be making the tax savings.
You can choose between a non-maintained novated lease or a fully maintained novated lease. The fully maintained novated lease includes costs like car registration, insurance and maintenance. For electric vehicles like a Tesla Model 3, it can also include charging costs.
This is a cost-effective way to pay for running costs because it'll also come from your pre-tax salary and so you'll save money compared to paying for those costs from your post-tax income.
Rebecca Pike is Finder’s money editor, with over 7 years of experience in mortgages and personal finance. A frequent TV and radio commentator, she frequently appears on Sunrise and 7News, Today and 9News, as well as Sky News, Channel 10 and across radio and print. 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
267
Finder guides across topics including:
Novated leasing a Tesla Model Y can be a great way to drive home with an electric vehicle while taking advantage of tax benefits.
Important information about this website
Finder makes money from featured partners, but editorial opinions are our own.
Finder is one of Australia's leading comparison websites. We are committed to our readers and stand by our editorial principles.
We try to take an open and transparent approach and provide a broad-based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.
Some product issuers may provide products or offer services through multiple brands, associated companies or different labeling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.
We make money by featuring products on our site. Compensation received from the providers featured on our site can influence which products we write about as well as where and how products appear on our page, but the order or placement of these products does not influence our assessment or opinions of them, nor is it an endorsement or recommendation for them.
Products marked as 'Top Pick', 'Promoted' or 'Advertisement' are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options.
Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment when you click on those buttons or apply for a product.
When products are grouped in a table or list, the order in which they are initially sorted may be influenced by a range of factors including price, fees and discounts; commercial partnerships; product features; and brand popularity. We provide tools so you can sort and filter these lists to highlight features that matter to you.
Please read our website terms of use and privacy policy for more information about our services and our approach to privacy.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
How likely would you be to recommend Finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
The information provided by Frankie is general in nature and has been prepared without considering your objectives, financial situation or needs. Frankie may make mistakes so it's important that you review the information before deciding. By messaging Frankie, you agree to our Terms and have read our Privacy Policy.
