How to Build a Smart Novated Lease Running Cost Budget

Why the running-cost budget matters so much

One of the biggest advantages of a novated lease is that almost every driving cost can be paid from pre-tax salary. To make that work smoothly, you set a yearly budget on day one and your salary packaging provider draws from it as bills come in.

Get the budget right and everything runs like clockwork. Fuel, insurance, servicing and rego just get paid, and any surplus at the end of the year is refunded to you through payroll.

Get it too low and you have a shortfall — you'll need to top up the account with after-tax money, which reduces the whole benefit. Get it too high and you tie up cash that could be earning interest or paying down other debt. The goal is a realistic, slightly conservative estimate you can revise each year.

The six main running-cost line items

Every novated lease budget usually includes six items: fuel or electricity, comprehensive insurance, registration and CTP, scheduled servicing, tyres, and roadside assistance.

Some packages also include car washes, minor repairs and windshield replacement. Ask your provider for the full list, because including more legitimate items in the pre-tax budget means bigger savings.

For EVs, add a separate line for home charging reimbursement (using the ATO safe harbour rate of 4.20c/km) and public charging receipts. These are both fully claimable pre-tax.

Realistic fuel budgets by vehicle type

For a small petrol car driven 15,000 km per year, expect around $1,900 to $2,400 in fuel. A mid-size petrol SUV runs $2,600 to $3,300. A large petrol SUV or 4WD can reach $3,800 to $4,500.

Diesel utes vary widely with use. Assume $3,000 to $4,000 for typical family use, more if you tow.

Hybrid vehicles like the Toyota RAV4 Hybrid or Corolla Cross usually save around 35–45% on fuel compared to their petrol equivalents. So a hybrid RAV4 might cost $1,600 to $2,000 per year.

EVs are the cheapest by far. A Tesla Model Y or BYD Atto 3 typically costs $500 to $900 per year to charge at home on a standard tariff, and even less on off-peak or solar.

Insurance: don't guess, get a quote

Comprehensive insurance is often the single biggest running cost, and it varies more than any other line item. Age, suburb, driving history and vehicle type all move the number.

Rough guides: a 40-year-old driver with a clean record in a metro suburb typically pays $900 to $1,400 for a mid-size SUV, $1,200 to $1,800 for a Tesla, and $700 to $1,000 for a small hatchback.

Under-25 drivers pay significantly more, sometimes double. Always get two or three real quotes before finalising your budget — insurance is where most people get their estimate wrong.

Your packaging provider can often arrange fleet insurance which is cheaper than personal insurance. Ask before defaulting to a retail policy.

Servicing and tyres — plan for the whole term

Scheduled servicing costs depend on the manufacturer's plan. A Toyota with capped-price servicing might be $250 to $350 per service, or $500 to $700 per year at 15,000 km. A European brand can be $700 to $1,200 per year.

EVs are the cheapest: many EV brands require only a $150 to $250 check every two years. Budget $200 to $400 per year to be safe.

Tyres are often forgotten. A set of four typically costs $600 to $1,400 depending on car size, and most drivers need one full replacement across a five-year lease at 15,000 km per year. Divide the cost across the term so it doesn't hit as a lump sum.

Registration, roadside and the little extras

Registration and CTP vary by state. As a rough guide: NSW $800–$1,000, VIC $850–$1,050, QLD $700–$900, WA $700–$900, SA $700–$900. Your packaging provider will confirm the exact amount for your postcode.

Roadside assistance is $100–$200 per year and always worth including. Windshield insurance is another $50–$100 for peace of mind.

Some drivers also include an annual detailing service ($200–$400) to protect the car's resale value. This is a small spend that often more than pays for itself when the residual comes around.

Putting it all together: a full worked example

Meet Josh, who leases a mid-size petrol SUV, drives 15,000 km per year, and lives in metro Melbourne. His yearly running-cost budget might look like this:

Fuel $3,000, insurance $1,200, registration $900, servicing $650, tyres $220 (spread from a $1,100 set over five years), roadside $150. Total: $6,120 per year, or roughly $235 per fortnight, all paid pre-tax.

At Josh's 37% marginal rate, paying that $6,120 pre-tax instead of post-tax saves him about $2,264 per year — before even considering the finance side of the lease. That's the value of getting the running-cost budget right.

The annual reconciliation: don't skip it

Once a year, your packaging provider reconciles the running-cost account. They compare what you budgeted against what was actually spent, and refund any surplus or ask you to top up any shortfall.

This is your chance to adjust the budget for the next year based on real data. If fuel came in $400 under, drop the budget. If servicing was more expensive because of an unexpected repair, add a buffer.

Reviewing the reconciliation carefully each year is the single best habit you can build. It keeps the tax benefit maximised and prevents surprises. Most drivers only take 15 minutes on it, and it saves them hundreds.

Common mistakes and how to avoid them

Mistake one: forgetting tyres. Always divide the tyre cost across the whole lease term rather than assuming they'll last forever.

Mistake two: underestimating insurance. Get two or three real quotes before you set the number. Don't rely on the packaging provider's default estimate — it's often optimistic.

Mistake three: not claiming home EV charging. The ATO safe harbour rate of 4.20c/km is legitimate, easy, and worth hundreds per year in tax back. Set it up on day one.

Mistake four: over-budgeting to feel safe. Every dollar you over-budget is a dollar tied up in a running-cost account that isn't earning you interest. Aim for a realistic estimate plus a small buffer, then adjust each year at reconciliation.

Frequently asked questions