If you have the option to buy your electric car and pay in full or installments in Australia, which choice would you opt for? It’s a no-brainer that a high portion of Australians would opt for an installment plan.
Most Australians go in for car loans, which allow them to buy an electric car and pay in bits. This eases the pressure on their finances and allows them to pay for the purchased electric car at their own convenient pace.
Another popular way to purchase an electric car in Australia and pay in bits is through a Novated Electric car lease.
This system operates virtually like a car loan. The only distinction is that with the novated lease, you pay from your pre-tax salary at the end of every month.
Novated Electric Car Lease In Australia
A novated arrangement in Australia is where an electric car of your preference is allotted to you which you in turn pay in installments from your salary.
An agreement is made between you and your employer on the amount to be deducted every month.
The type of car that will be leased to you will depend on your salary and the financier.
The financier purchases the car in full and then you pay back in bits to them through a special arrangement with your employer.
When Did Novated Electric Car Lease Start Working In Australia?
The new electric car lease in Australia started functioning after the Government of Australia made a review of the tax laws. This review makes it comfortable to acquire an electric car for personal usage
The results of the review were that potential electric car owners be given a Fringe Benefits Tax(FBT) immunity. This tax immunity aims to increase electric car ownership in Australia.
Australians would be able to smoothly purchase an electric car through a Novated car lease.
The novated car lease is a special payment arrangement between you, your employer, and a financier.
Part of your salary is deducted monthly and used to pay for the electric car purchased and leased to you by the financier.
You enjoy Fringe Benefits Tax (FBT) immunity on your salary from which the deductions are made monthly.
Some of the electric vehicles that benefit from Fringe Benefits Tax (FBT) immunity are;
- Hyundai Ioniq 5
- Hyundai Kona Electric
- Mazda MX-30 Electric
- Mitsubishi Outlander PHEV
- Mercedes-Benz EQ
- Mini Cooper SE
- Tesla Model Y
- Mercedes-Benz A 250e
- Mini Countryman Cooper SE
- Kia Sorento PHEV
- Volvo XC40 Recharge Pure
Difference Between Novated Lease vs Car Loan In Australia
Both the novated lease and car loan in Australia function in a way that you acquire a vehicle on credit and pay back installments.
They both have resemblances but there are a lot of differences as well.
The table below shows the difference between a Novated lease and a car loan in Australia.
| Novated Lease | Car Loan |
| Can only materialize when your employer agrees. | Anyone can apply provided you meet the requirements |
| You will need a Financier to make it happen after agreeing with your employer. | The application is between you and a Financial institution that provides car loan assistance. |
| The mode of repayment is through monthly deductions from your salary by your employer. | You repay directly on your own. Has nothing to do with your employer. |
| You are required to make a percentage deposit before the rest is spread monthly. | Making a percentage deposit is optional not a requirement. |
| You enjoy Fringe Benefits Tax (FBT) immunity. | Fringe Benefits Tax (FBT) immunity doesn’t apply |
How Does The Novated Electric Car Lease Work In Australia?
These steps provide details as to how a renovated electric car lease works in Australia.
- The first on the list is identifying the type of electric car you wish to purchase. It can be a brand-new car or a used one. The choice is yours to make.
- Then you contact a financier with whom you make a lease agreement to purchase the car you want upfront for which you will in turn pay back in installments.
- After that, you discuss and agree with your employer to deduct a percentage of your pre-tax salary. The deducted money is forwarded to the financier by your employer in your name.
- You also have the option of combining all additional costs that arise from using your electric car into one single monthly payment. Some of the costs include charging and insurance.
- The duration for payment mostly spans between 1-5 years where you have a particular amount deducted from your salary every month.
The good news is that with the novated Electric car lease, you end up paying less tax throughout the year.
Your salary doesn’t have to be a lot to enjoy the renovated car lease package.
If your annual salary is AU$30,000.00 and your Novated deduction is 10 percent monthly amounting to AU$3,000.00, then it means you end up paying tax on AU$27,000.00.
The AU$30,000.00 from which the Novated deductions will be made is nontaxable.