Novated leasing has been a popular car financing option for Australian employees for years, but with rising interest rates, changing tax laws, and the increasing adoption of electric vehicles (EVs), many workers are wondering: is novated leasing still a good deal in 2025?
If you’re considering getting a car through a novated lease this year, here’s everything you need to know—from potential savings to new government incentives and what the future of novated leasing looks like in Australia.
How Novated Leasing Works
A novated lease is a salary packaging arrangement between you, your employer, and a leasing company. Essentially, your employer makes the car payments directly from your pre-tax salary, reducing your taxable income and providing potential tax benefits.
Key Benefits of a Novated Lease:
✅ Pay for your car pre-tax, reducing your taxable income.
✅ Includes running costs like fuel, maintenance, and insurance.
✅ Works for new, used, and electric vehicles (EVs).
✅ Can be transferred between employers if you switch jobs.
✅ Helps you budget easily since all car-related expenses are bundled into one payment.
✅ Potential to save thousands of dollars compared to a standard car loan.
While this setup has clear financial perks, is it still as beneficial in 2025 as it used to be?
What’s Changed for Novated Leasing in 2025?
More Tax Incentives for EVs
The Australian government has extended its Fringe Benefits Tax (FBT) exemption for EVs, making novated leasing even more attractive if you’re considering an electric car.
- FBT Exemption: EVs priced under a certain threshold are exempt from FBT, making them a cheaper option for salary packaging.
- Lower Running Costs: EVs have lower maintenance and fuel costs, adding to the long-term savings of a novated lease.
- More EV Availability: With an increasing number of EV models available in Australia, it’s easier than ever to find a car that qualifies for tax benefits.
- Growing Charging Infrastructure: More charging stations nationwide make EV ownership more convenient than ever.
Interest Rates Have Stabilised
After a period of rising interest rates in 2023-2024, things have stabilised in 2025. While novated lease rates are slightly higher than before, they are still competitive with traditional car loans.
- Fixed-rate leases are now more common, allowing employees to lock in their payments.
- Shorter lease terms (2-3 years) have gained popularity to help employees switch to newer EVs as technology advances.
Used Cars Are Now Eligible for Novated Leasing
A major change in 2025 is that some providers now allow used cars to be financed through a novated lease. This is great news because:
- Lower purchase price = lower repayments.
- More flexibility in choosing a vehicle (instead of being limited to new cars).
- Still get tax benefits, depending on the age of the vehicle.
- Reduces depreciation concerns, making it a better long-term financial move.
More Employers Are Offering Novated Leasing
With companies looking for cost-effective employee benefits, more employers have added novated leasing as an option for their staff. This means:
- Easier access to leasing through salary packaging.
- More competition between leasing providers, leading to better deals.
- Additional perks such as fuel cards and service discounts being bundled into leases.
Is Novated Leasing Right for You in 2025?
While novated leasing still offers tax advantages, it’s not for everyone. Let’s compare different situations.
Novated Leasing is a Great Choice If You:
✅ Earn a steady salary with a tax rate of 30% or higher.
✅ Want lower monthly car payments with bundled running costs.
✅ Plan to drive a new or qualifying used vehicle.
✅ Are considering an EV, since tax benefits are better than ever.
✅ Want a hassle-free, all-inclusive car payment setup.
✅ Drive moderate to high mileage annually, making the tax savings more beneficial.
You Might Want to Reconsider If You:
❌ Change jobs frequently (as the lease depends on your employer).
❌ Drive very few kilometres per year, reducing the tax benefit.
❌ Prefer to own your car outright rather than lease.
❌ Have a lower tax bracket, where tax savings may not be as significant.
❌ Plan to keep a car for more than 5 years, as leasing may become costly over time.
What Happens at the End of a Novated Lease?
At the end of your lease (typically 3-5 years), you’ll have a few options:
- Pay the residual value and own the car outright.
- Trade in the vehicle and start a new lease.
- Refinance the residual amount if you want to keep the car but can’t pay it off immediately.
- Upgrade to a newer model, which is particularly beneficial for EVs as technology rapidly improves.
Is Novated Leasing Still Worth It in 2025?
If you’re a full-time employee looking for a tax-effective way to drive a new or used car, novated leasing remains a strong option in 2025—especially for those considering EVs.
With government incentives, employer-backed benefits, and all-inclusive repayments, novated leasing still offers great value. However, it’s essential to compare costs, check eligibility, and consider long-term goals before committing.
If you’re unsure whether a novated lease or traditional car finance is better for you, speak with a leasing specialist or financial advisor to crunch the numbers!
FAQs
Are electric cars cheaper on a novated lease in 2025?
Yes! The FBT exemption for EVs makes electric vehicles one of the most tax-effective options under a novated lease.
Can I use a novated lease for a used car?
Yes! Some providers now allow used cars to be financed through novated leasing, giving more flexibility in vehicle choices.
What happens if I change jobs during a novated lease?
If your new employer offers novated leasing, you can transfer the lease. Otherwise, you may need to pay out or refinance the lease.
How much can I save with a novated lease?
Savings depend on your salary, tax bracket, and the car you choose, but many employees can save thousands per year compared to traditional car loans.
Is novated leasing better than a standard car loan?
For many employees, yes—because it includes pre-tax benefits and running costs. However, those who prefer ownership or frequently change jobs may find a traditional loan more suitable.
Whether you’re looking for a tax-effective way to finance a car or exploring your options for EV ownership, novated leasing in 2025 remains a solid choice for many Australian employees!
If you need expert advice, don’t hesitate to reach out to us. We’re here to guide you through every step. Contact Us and take charge of your financial future today!
✉️ info@wealthyyou.com.au
☎️ (02) 7900 3288
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