If you’re considering an electric vehicle through a novated lease, understanding how the arrangement works can make the decision much easier.
An EV novated lease combines vehicle finance with salary packaging, allowing eligible employees to pay for their car and certain running costs through their pre and post tax salary. Eligible electric vehicles may also receive additional tax advantages through the EV FBT exemption.
Here are seven important things to understand before getting started.
1. An EV novated lease is paid through your salary
A novated lease is an arrangement between you, your employer and the lease provider.
Instead of making your vehicle payments solely from your post tax income, eligible lease expenses are deducted from a combination of pre and post tax income through your employer’s payroll.
For eligible electric vehicles, most of the vehicle related finance and running cost may be paid from your pre-tax salary because of the current FBT exemption.
This can reduce your taxable income while allowing you to package the cost of your vehicle and eligible running expenses together.
2. Eligible EVs can qualify for the FBT exemption
One of the biggest reasons EV novated leasing has become attractive to Australian employees is the Fringe Benefits Tax (FBT) exemption.
Eligible battery electric vehicles and hydrogen fuel cell electric vehicles can qualify for the exemption when they meet the applicable requirements.
This can significantly change the cost of salary packaging an EV compared with a vehicle that does not qualify for the exemption.
However, not every electric vehicle automatically qualifies.
The vehicle’s value, when it was first held and used, any Luxury Car Tax and the applicable government requirements all need to be considered.
You can learn more about the EV FBT exemption before choosing a vehicle.
3. Your running costs can be included in the lease
A novated lease isn’t only about financing the purchase of the car.
Eligible vehicle running expenses can also be incorporated into the salary packaging arrangement.
Depending on your package, these can include:
- Fuel/Charging costs
- Comprehensive insurance
- Registration and CTP
- Servicing
- Maintenance
- Tyres
Instead of managing these expenses individually throughout the year, they’re budgeted as part of your novated lease. And can be partly or wholly paid from your pre-tax income.
This can make vehicle expenses easier to manage because you’re working with a more predictable ongoing vehicle budget and maximise your tax benefits.
4. You may also save GST on eligible costs
The potential tax benefits of an EV novated lease aren’t limited to FBT.
Depending on the arrangement, GST savings may also apply to the purchase price of the vehicle up to the applicable input tax credit limit ($6,353 for FY2026-2027) and to eligible running costs.
This is one reason it’s important to compare the overall cost of obtaining an EV rather than simply comparing the monthly lease repayment with a traditional car loan or the purchase cost when buying it outright with cash..
Your salary, vehicle price, lease term, annual kilometres and running costs can all influence the final outcome.
Fingo’s Novated Lease Calculator can help you estimate how the numbers may look for your circumstances.
5. Your employer needs to support novated leasing
You cannot normally establish a novated lease entirely on your own.
Because payments are processed through salary packaging, your employer needs to participate in the arrangement.
If your workplace already offers novated leasing, the process may be relatively straightforward.
If it doesn’t, this doesn’t necessarily mean a novated lease is impossible. You can ask whether your employer is willing to introduce novated leasing as an employee benefit, as there is little to no additonal cost to the employer..
Before choosing your vehicle, it’s therefore worth confirming your eligibility and your employer’s requirements.
6. EV novated leasing can be particularly attractive for high-mileage drivers
How much you drive matters when comparing vehicle costs.
Drivers covering significant distances each year may benefit from the lower running and maintenance requirements commonly associated with electric vehicles.
Charging costs can also be considerably different from petrol or diesel expenses, particularly for drivers who can regularly charge their vehicle at home.
With a novated lease, eligible running expenses can be incorporated into the package, making it easier to compare the expected cost of operating the vehicle over the lease term.
However, high mileage alone doesn’t automatically make an EV novated lease the best option.
And if the majority of those kilometres are business-related, you may be able to use the Operating Cost Method (OCM) to achieve tax savings on an internal combustion engine (ICE) vehicle or non-eligible EVs that are comparable to those available on an EV under the FBT exemption.
Consider your:
- Daily driving distance
- Business use precentage
- Home charging availability
- Electricity costs
- Public charging requirements
- Insurance
- Expected servicing
- Vehicle range
- Lease term
The right vehicle should suit your actual driving habits as well as your financial circumstances.
7. You have options when the lease ends
A common concern for first-time novated lease customers is what happens to the vehicle at the end of the agreement.
A novated lease has a residual value, which is established when the lease is arranged.
When your lease reaches the end of its term, your options may include:
- Paying the residual and keeping the vehicle
- Refinancing or extending the arrangement where available
- Trading the vehicle in and moving into another car
The best option will depend on your circumstances and the vehicle’s value at the time.
This is particularly worth considering with EVs because battery technology, new-model pricing and the used-EV market can change over the course of a multi-year lease.
What should beginners compare before choosing an EV novated lease?
Before signing an agreement, look beyond the advertised monthly payment.
Consider the complete arrangement, including:
| What to Compare | Why It Matters |
|---|---|
| Vehicle price | Influences the amount being financed |
| FBT eligibility | Can materially affect the tax treatment |
| Lease term | Changes repayments and residual value |
| Estimated running costs | Helps create a realistic vehicle budget |
| Charging costs | Important when comparing an EV with petrol or hybrid alternatives |
| Insurance | Premiums vary considerably between vehicles |
| Annual kilometres | Affects expected running expenses |
| Residual value | Determines the amount remaining at the end |
| Fees and charges | Contribute to the total cost of the arrangement |
| End-of-lease options Business use percentage | Determine your choices when the lease finishes. Determines if the Operating Cost Method will be more suitable and yield high tax benefits when the EV is not eligibile for theEV FBT Exemption. |
Is an EV novated lease right for you?
An EV novated lease can be attractive for eligible Australian employees, particularly when the vehicle qualifies for the FBT exemption.
But the tax benefit shouldn’t be the only reason you choose one.
The vehicle still needs to suit your budget, commute, charging access and lifestyle.
Before committing, compare the total expected cost of the arrangement and understand what is included in your package.
Fingo can help you compare eligible vehicles, understand salary packaging and work through the expected costs before you make a decision.
You can also use the Fingo Novated Lease Calculator to estimate your potential costs and savings.
