Estimate Your Novated Lease Savings and Costs

Are you looking to understand the potential savings and costs of a novated lease? A novated lease could help you drive big savings! Vehicle Solutions’ Novated Lease Calculator breaks it all down — potential tax savings, running costs, regular payments and total costs designed around your salary packaging. It’s the perfect tool for assessing whether a novated lease is the right vehicle financing option for you. See how novated leasing stacks up for your financial circumstances.

Novated Leases

What is a Novated Lease Calculator?

A novated lease calculator is a tool for estimating the cost of a car lease and the potential savings you’ll gain from a novated lease.

When looking at any Novated Lease calculator, it is important to understand what is included and what is not. On a Novated Lease calculator, the provider can change how fueling, tyre maintenance, and scheduled services are calculated, reducing the amount allocated to running costs to make their quotes look cheaper. However, in the end, you could be paying a lot more.

It is very important to understand what is in each running cost budget and how they are calculated, including lease payments deducted directly from your salary.

Additionally, lease payments are often taken from your pre-tax salary, reducing your taxable income and potentially lowering your overall income tax. At the end of this explanation, you will be able to check any current quotes and see what’s right and what’s missing!

The Novated Lease Running Costs Calculations

Fuel

Each car manufacturer (e.g. Toyota) will publish an average fuel usage for each vehicle. This fuel usage is usually represented in litres per 100kms. For example, an average small car usage is about 6 to 7 litres per 100kms; for a large 4×4, this can range between 12 to 16 litres per 100kms. In our Novated leasing calculator, we use this measurement to calculate each fuel budget:

(Litres/100kms) X (Your annual km travelled/100) X (Average fuel cost per litre) = Fuel budget.

(7.5) X (15,000/100) X $2.25 = $2,531.25 Annual Fuel Budget.

Our Novated lease calculator uses $2.25 for the fuel cost because we have clients in parts of Australia where fuel is consistently at this price level.

Tyres

A tyre budget is a little more complex to estimate in a Novated leasing calculator simply because tyre prices can vary greatly depending on the type of tyre the driver wants. For example, a lower-profile tyre may be more expensive but essential to the vehicle driver. In our Novated Lease calculator, we research the average cost for each vehicle category we use. We simply apply this cost to an average tyre change period, and the budget is set.

(Average cost of a tyre X 4) = Cost of a set of tyres.

Your annual kms travelled x the lease term in years = Total KMs

Total KMs/35,000kms (average tyre change period) = Sets of tyres required.

Sets of tyres required x Cost of the set/years of lease = Total tyre budget per year.

Example: Mary drives 15,000 km per year and is about to start a 5-year lease. A set of her tyres costs $850.15,000 x 5 = 75,000kms /35000 = 2.14 sets of tyres x $850 per set = $1,819/5 years = $363.80 per year.

Maintenance

Most cars need service every 10,000 to 15,000km, and the cost of this service depends on the type of vehicle you choose. In our Novated lease calculator, we have set a preset budget estimate depending on the vehicle type (small hatch, large, 4×4…, etc.) you choose.

Example – Mary drives 15,000km a year in her Toyota Prado 4×4 Wagon.

$450 Per service every 15,000kms = $450 per year.

Registration and Insurance

We use an estimate again for registration and insurance renewals depending on the type of vehicle chosen.

Finance

The finance is on a standard novated lease calculation with a few small variations. The fringe benefits tax impacts the overall cost by providing exemptions for non-luxury electric vehicles, making them more affordable. Additionally, the luxury car tax threshold determines eligibility for various tax benefits, affecting the pricing and accessibility of these vehicles.

For instance, if the lease is two months in arrears. This means that the payments for the first two months are $0.00. These payments are spread over the balance of the lease term. For example, if you want to take a 5-year (60-month) lease, there will be 60 payments.

However, the first and second months will be $0.00 and 58 payments of $400, for example. This structure allows the Salary Packaging company, such as Vehicle Solutions Australia, to establish the service, including the payroll deductions and collect several deductions before the first real payment is due.

If necessary, you can finance the first year’s comprehensive car insurance. This means that you never have to pay cash for your insurance. When it is due again in 12 months, simply send in the renewal, and the Salary Packaging provider can pay it out of the funds in your Novated Lease account.

Novated leasing can significantly reduce a vehicle’s purchase price. It also offers potential GST savings, making it a more cost-effective option than traditional car-buying methods.

Loan or Lease

For most people, buying a car means they need some form of finance. One of the most common questions is, wouldn’t I be better off putting the car on a standard car loan? You can start by comparing the difference between a loan and a lease.

Clarifying the Balloon Payment and Residual Value

There is always a lot of talk about the balloon payment that falls due at the end of your lease. This is called the residual value (for tax purposes). The ATO allows you to pay for your car through your employer. This arrangement saves you income tax, GST and time as it is very convenient to run. However, because your employer is paying for the vehicle from money deducted from your salary, you can’t get any equity in this vehicle for tax purposes only. That means it needs to be paid back to a realistic market value at the end of the lease.

Good news: Because there is a residual value at the end, your repayments are cheaper during the lease term. Most people use these cheap finance payments to buy a more expensive car.

The residual value is an ATO-set percentage based on the lease term, with a buffer of approximately 5% on either side of the required rates.

  • Benefits of a Novated Lease

    • Tax Savings: Save on income tax by reducing your taxable income through novated leasing, which involves pre-tax salary deductions.
    • Novated Leasing Calculator: Use a novated leasing calculator to estimate your potential savings and understand the financial implications of a novated lease agreement.
    • Lower Ownership Costs: Bundle expenses like insurance and maintenance into one monthly payment.
    • Vehicle Choice Flexibility: Choose a vehicle that suits your needs and preferences, tailored to your personal circumstances such as budget, vehicle type, and travel habits.
    • Simplified Budgeting: Manage all your vehicle-related costs through one payment.
    • Employer-Supported Benefits: Enjoy additional advantages facilitated by your employer’s involvement in the lease, including significant tax benefits.

Finance Approval Conditions

After you have finished using our Novated Lease Calculator and feel you can afford the deduction from your salary, the next step is getting the finance or lease approved. In general, getting a Novated lease approved is a little easier than getting normal finance. This is because the financier is getting the repayments directly from your employer before you even get taxed. This gives the financier more confidence that their loan will be repaid.

To get a pre-approval started, click HERE. The pre-approval will provide you with approval in principle on the vehicle you choose. This approval is not binding; we never pressure you to use it. However, it will give you a better negotiating position in the vehicle purchase. People who are ready to buy and have the funds in place can request a cash price for immediate delivery.

Frequently Asked Questions

Absolutely. First, you’ll save on tax. Then you’d reduce running costs, particularly with the electric car discount. A novated lease can save you thousands. With tax savings through salary packaging, a novated lease often costs less than traditional car loans. It’s worth every dollar saved. Want an EV? Check out our EV novated lease calculator. 

Yes, but it’s not automatic. At the end of your lease, you’ll need to pay the residual value to own the car outright. Until then, enjoy lower running costs and tax savings throughout the lease term.

Let’s say you earn an annual salary of $80,000 and a lease payment on your EV is $12,000 a year. With a marginal tax rate of 32.5%, you’ll save $3,900 in income tax annually and an additional $1,090 in GST. This is just one example, but many Australians see similar benefits depending on their financial circumstances.

A quick rule of thumb: keep your lease payments under 15% of your monthly take-home pay. For instance, if your take-home pay is $5,000/month, aim for a monthly lease payment of $750 or less. Use our handy calculator to crunch your numbers and find the right fit. You may also make your inquiries one-on-one with our expert by Requesting a Novated Lease Enquiry!

The sweet spot is typically 2–5 years. Want flexibility? Go for a shorter term. Prefer lower regular payments? Choose a longer one. The best term depends on your financial goals and driving needs.

If you have any questions about the numbers or would like to discuss the process, please feel free to call us during office hours at 1300 990 880 or email us at [email protected]. 

However, if you have any questions regarding the numbers or want to discuss the process, please contact us during office hours at 1300 990 880 or click HERE to send us an enquiry form.