Your employer offers novated leasing. You could also just get a personal loan, own the car outright, and be done with it. The novated lease sounds good — the tax saving is real — but so is the paperwork, the residual at the end, and the dependency on staying employed. This guide works through the actual numbers at different salary levels, explains where each option wins, and helps you decide which one makes sense for your situation.
The core advantage of a novated lease over a personal loan is that you buy the car with a mix of pre-tax and post-tax dollars, instead of entirely post-tax dollars. Every dollar that goes through salary sacrifice reduces your taxable income by one dollar — saving you whatever your marginal tax rate is on that dollar.
On a $120,000 salary, the marginal rate is 37%. For every $1,000 sacrificed, you save $370 in income tax. On a $55,000 vehicle with $19,700 in annual salary sacrifice (finance payment plus running costs), the annual tax saving is around $6,500 — or just under $20,000 over three years.
The catch is the post-tax ECM contribution — on a petrol or diesel vehicle, you also pay a post-tax amount to eliminate the FBT liability, which partially offsets the tax saving. For a $55,000 vehicle, that ECM contribution runs around $860 per month. The net saving is the tax saving minus the ECM cost.
Battery electric vehicles under the fuel-efficient LCT threshold ($91,387 in FY2025–26) are FBT exempt. No post-tax ECM contribution is required. The full salary sacrifice goes through pre-tax, and the tax saving is undiminished. This is the biggest single factor that makes an EV under a novated lease substantially cheaper than a petrol vehicle under the same structure — and dramatically cheaper than a personal loan.
All figures below: $55,000 drive-away, VIC, 3-year term, 15,000 km/yr, 6.5% novated rate, 7.5% personal loan rate. Novated includes fuel, rego, insurance, servicing pre-tax. Personal loan adds the same running costs from post-tax income. True total cost includes all payments plus residual minus estimated exit value.
| Salary | Novated total cost | Personal loan total cost | Novated saving | Winner |
|---|---|---|---|---|
| $60,000 | $74,200 | $78,900 | $4,700 | Novated |
| $80,000 | $71,500 | $78,900 | $7,400 | Novated |
| $120,000 | $68,100 | $78,900 | $10,800 | Novated |
| $180,000 | $64,400 | $78,900 | $14,500 | Novated |
The novated lease wins at every salary level for a petrol vehicle in this scenario — but the margin narrows significantly at $60,000. The personal loan cost stays flat because it's independent of salary. The novated cost falls as salary rises, because the tax saving is proportional to the marginal rate.
The figures above use illustrative rates and assumptions. Your actual comparison depends on the novated lease rate your provider offers, the personal loan rate you qualify for, your running costs, and your state's stamp duty. Run your own numbers in the Veercal novated calculator and the full calculator with your actual vehicle price and salary.
The FBT exemption for battery EVs under $91,387 drive-away removes the post-tax ECM contribution entirely. On the same $55,000 vehicle as an EV, the comparison looks like this at $120,000 salary:
| Vehicle type | Novated total cost | Personal loan total cost | Novated saving |
|---|---|---|---|
| Petrol / diesel | $68,100 | $78,900 | $10,800 |
| Battery EV (FBT exempt) | $55,200 | $78,900 | $23,700 |
The EV novated lease costs $12,900 less than the equivalent petrol vehicle novated lease — and $23,700 less than the personal loan alternative. This is the policy intent: making EVs dramatically more affordable through salary packaging by eliminating FBT.
For anyone considering an EV under $91,387 drive-away who has access to novated leasing, the comparison with a personal loan is not particularly close at salaries above $80,000.
The cost comparison favours novated leasing clearly for most salaried employees. But cost isn't everything. There are genuine trade-offs worth weighing honestly:
The residual. At the end of the term, you don't own the car — you owe the residual. That lump sum (52.88% of the base price for 15,000 km/yr over 3 years) needs to be paid, refinanced, or covered by the car's trade-in value. A personal loan on the same term leaves you owning the car outright with no further obligation.
Employment dependency. If you leave your employer, the salary sacrifice arrangement ends and the lease reverts to a personal loan in your name. The finance doesn't disappear — you continue repaying — but the tax benefit stops. If you're planning a career change, starting your own business, or working on a short-term contract, this is a material consideration.
Complexity. A novated lease involves three parties (you, your employer, the finance provider), FBT paperwork, a running cost budget account, year-end reconciliation, and provider management fees. A personal loan has one relationship: you and the lender.
The tax saving. This is the big one. Every dollar you pay in loan repayments comes from post-tax income. The novated lease packages that same expenditure pre-tax and saves you your marginal rate on every dollar of sacrifice. Over three years on a $55,000 vehicle at $120,000 salary, that's approximately $10,000 left on the table.
Pre-tax running costs. With a novated lease, fuel, rego, insurance, and servicing are paid pre-tax. With a personal loan, those same costs come from your after-tax pay. At a 37% marginal rate, $7,000 in annual running costs costs you $11,111 in gross salary — whereas via novated lease you sacrifice $7,000 and pay $7,000 worth of costs.
Below $45,000 (19% marginal rate): The tax saving is modest. For a petrol vehicle, the ECM contribution may absorb most or all of the income tax saving. The novated lease is only clearly better if your employer subsidises the management fee or you're accessing an FBT-exempt organisation's higher cap. Run the numbers specifically — don't assume novated wins.
$45,000–$135,000 (32.5% marginal rate): Novated leasing produces a meaningful saving, typically $5,000–$12,000 over three years on a mid-range vehicle. The personal loan is simpler but materially more expensive. For most people in this range with stable employment, novated is the better financial choice for the vehicle purchase alone.
Above $135,000 (37–45% marginal rate): The saving is substantial and the case for novated is strong. The only reasons to prefer a personal loan at this salary level are employment instability, a strong preference for outright ownership, or a vehicle that doesn't suit the novated structure.
EV, any salary above $60,000: The combination of FBT exemption and salary sacrifice makes a novated lease the clear winner. The personal loan isn't close.
Three questions determine the answer for most people:
Does your employer offer novated leasing? If not, the question is answered. Work through eligibility — it may be possible to ask your employer to set it up, and most do when asked. See the eligibility guide for how to approach that conversation.
How stable is your employment? If you're confident you'll be with the same employer for the full lease term (or confident you could transfer the arrangement to a new employer), the employment risk is manageable. If your situation is less certain, the personal loan's portability has real value.
What are the actual numbers for your salary and vehicle? The answer varies enough between scenarios that the generic comparison above can only get you so far. Run your specific numbers — salary, vehicle price, state, and term — through the Veercal novated calculator and the full calculator side by side. The difference in dollars tells you how much the flexibility of a personal loan is actually costing you.