Novated Lease vs Car Loan in 2026: Which Actually Saves You More?

"Which one actually saves me money?" is the question we get asked more than almost any other, and the honest answer is: it depends on your salary, how much you drive, whether your employer offers salary packaging, and this year, what car you are buying. There is no single right answer, but there is a clear way to work out which one is right for you.

With the 2026-27 Budget reshaping the FBT settings on electric vehicles, the gap between these two options has actually widened for some buyers and narrowed for others. Here's how to read your own situation properly.

How Each Option Actually Works

A novated lease is a three-way agreement between you, your employer, and a leasing company. Your employer deducts the lease payments from your pre-tax salary, which reduces your taxable income. Running costs like fuel, servicing, insurance and registration can often be bundled into the one payment.

A car loan is a straightforward borrowing arrangement. You repay it from after-tax income, you own the car from day one, and running costs are paid separately, whenever they come up. If you want to see the full range of car loan options available, from new to used vehicle finance, that is worth a look before you compare it against a lease.

The Real Comparison Table

Does Your Salary Bracket Change the Answer?

Yes, significantly. A novated lease saves you money by taking lease payments out before tax is applied, so the size of that saving depends entirely on your marginal tax rate. Under the ATO's 2026-27 rates, income between $45,001 and $135,000 is taxed at 30%, $135,001 to $190,000 at 37%, and anything above $190,000 at 45%, plus the 2% Medicare levy.

In practical terms: on a $60,000 salary in the 30% bracket, every dollar you salary sacrifice saves you roughly 32 cents in tax. On $150,000 in the 37% bracket, that jumps to roughly 39 cents. The higher your marginal rate, the more a novated lease tends to outperform a car loan, all else being equal. Below the tax-free threshold or in the lowest bracket, the tax saving shrinks enough that a straightforward car loan is often just as good, sometimes better once lease fees are factored in.

Does How Much You Drive Matter?

It does, mostly through the running costs bundled into a novated lease. If you're doing low kilometres, say a short commute a few days a week, the running cost bundle matters less, and a lot of the novated lease's advantage comes down to the tax saving alone.

If you're covering high annual kilometres, the bundled running costs (fuel or charging, servicing, tyres, insurance) start doing real work, because you're paying for those with pre-tax dollars instead of after-tax income either way. For high-km drivers with employer packaging access, a novated lease usually pulls further ahead of a car loan the more you drive.

The EV Factor: Why the FBT Changes Tip the Scales

This is the part that's changed the most this year. As we covered in our EV FBT exemption breakdown, electric vehicles under $75,000 novated before 1 April 2029 still qualify for a meaningfully reduced FBT position that petrol and diesel vehicles simply do not get access to. That is a lever a car loan cannot offer at all, regardless of your salary or how much you drive.

If you're weighing up an EV specifically, check our roundup of the cheapest electric cars in Australia to see how far your budget stretches, then run the novated lease numbers against an EV car loan on the same vehicle before deciding.

Quick Verdict Framework

Use this as a starting point, not a final answer. Your actual numbers should always be confirmed with a broker.

• High income (30%+ bracket), employer offers packaging, decent annual kilometres: Novated lease usually wins, more so on an eligible EV.
• Middle income, employer offers packaging, low kilometres: Close call, worth comparing both, tax saving alone may still edge it.
• No employer packaging access, or self-employed: Car loan by default, novated leasing is not available to you. If the vehicle is for business use, our commercial vehicle finance options are worth comparing too.
• Lower income bracket, want to own the car outright quickly: Car loan usually makes more sense.
• Buying a used or older vehicle: Car loan, most novated lease providers focus on new or near-new vehicles.

Key Takeaways

• Novated leases save more the higher your marginal tax rate and the more you drive.
• A novated lease only works if your employer offers salary packaging. That is a hard requirement, not a preference.
• The 2026-27 FBT changes make eligible EVs under $75,000 a stronger novated lease case than combustion vehicles.
• Car loans remain the simpler, often cheaper option for lower incomes, no packaging access, or used-car buyers.
• Run both scenarios against your real salary and car choice before committing either way.

Not sure which structure suits your situation? Our brokers compare 30+ lenders and can model both a novated lease and a car loan against your actual numbers. You can also estimate your repayments first. Call 1800 079 147 or get in touch online to get started.

Source referenced: Australian Taxation Office, Individual income tax rates.

This article provides general information only. It does not constitute financial advice. Please consider your personal circumstances before making any financial decisions. Loans123 holds Australian Credit Licence 512846.