The headline difference
A car loan is paid from your after-tax income. A novated lease is paid from your pre-tax income. That single difference is the reason novated leasing exists and the reason so many Australians choose it over a traditional loan.
On a $60,000 car for an employee at the 37% marginal tax rate, the pre-tax treatment typically saves between $3,000 and $6,000 per year, depending on running costs and lease term.
When a car loan still wins
If you plan to keep the vehicle for ten years, drive very few kilometres or have an unstable employment situation, a car loan can be the safer choice. Loans let you sell or refinance the asset at any time, while a novated lease ties the vehicle to your current employer.
Car loans also avoid the residual or balloon payment that ends every novated lease, although that residual is often offset by trading the car in or refinancing the lease.
How to decide in five minutes
Open our calculator, enter the same vehicle price, term and your salary into both scenarios, and compare annual cost of ownership. The numbers, not the marketing, should make the decision for you.
Run the numbers for your situation
Use our free Australian novated lease calculator to see exactly how much you could save.
Open the calculator