EOFY Car Buying: A Smarter Way to Think About Your Next Vehicle

As the end of the financial year approaches, many Australians begin reviewing their finances, tax position and major household expenses for the year ahead. For those considering purchasing a new vehicle within the next 6–12 months, it may also be an appropriate time to better understand the potential benefits of a novated lease arrangement.

What many Australians do not realise is that a novated lease can often provide greater budgeting certainty as well. Rather than managing multiple separate car-related expenses throughout the year, many of these costs can be consolidated into one structured payment arrangement, helping individuals better manage household cash flow.

For Australians considering an electric vehicle (EV), there may be additional advantages worth exploring. Under current legislation, eligible EVs may qualify for Fringe Benefits Tax (FBT) exemptions, which can significantly improve affordability outcomes when compared to traditional financing structures.

A Real-World Example

To better understand how a novated lease may work in practice, let’s look at Sarah’s experience.

Sarah was considering purchasing a new electric vehicle valued at $65,000 and compared three different options:

• Paying cash upfront

• Taking out a traditional car loan

• Using a novated lease through her employer.

After comparing the numbers over five years, the results were hard to ignore.

The Results

Total Savings with a Novated Lease

• $24,387 saved vs paying cash

• $25,064 saved vs a car loan

Why the Novated Lease Came Out Ahead

Tax Savings

Lease repayments and running costs are deducted from Sarah’s pre-tax salary, reducing her taxable income and lowering the amount of tax she pays over time.

GST Savings

Instead of paying the full $65,000 purchase price, Sarah effectively acquired the vehicle for $59,398.64 excluding GST through the novated lease structure.

Lower Running Costs

Charging, registration, insurance, servicing, and tyres were bundled into the lease and paid using tax-effective salary packaging.

Better Cash Flow

Rather than tying up $65,000 in savings, Sarah kept her cash available for investments, emergencies, and lifestyle expenses.

EV FBT Exemption

Because Sarah chose an eligible electric vehicle, she also benefited from the Australian Government’s FBT exemption for EV novated leases, dramatically improving the overall savings.

Importantly, a novated lease is not simply about financing a vehicle. It is about understanding whether the structure aligns with your broader financial circumstances, lifestyle needs and budgeting objectives.

Before proceeding, individuals should ensure they understand:

• total vehicle and running costs.

• lease flexibility and exit arrangements.

• tax implications.

• vehicle suitability and affordability.

• the impact on personal cash flow and salary packaging arrangements.

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