Lease vs Buy Car Calculator
Compare leasing vs buying a car in Australia. Evaluate novated lease, chattel mortgage, and outright purchase to find the most cost-effective option for your situation.
Compare Your Options
Vehicle Details
Typical range: 25-40% for 5-year term
Insurance, rego, servicing, tyres, fuel
Financial Details
Novated Lease
-
Chattel Mortgage
You own the car outright
Outright Purchase
Immediate ownership, no payments
Total Cost Comparison
Understanding Your Options
| Feature | Novated Lease | Chattel Mortgage | Outright Purchase |
|---|---|---|---|
| Tax benefit | Pre-tax salary packaging | Interest deductible (business) | None (personal use) |
| Ownership | Finance company until residual paid | You own (with lender interest) | Immediate full ownership |
| GST | Spread across lease term | Claim back if ABN registered | Included in price |
| Running costs | Pre-tax salary packaging | After-tax (unless business) | After-tax payment |
| Best for | PAYG employees, high income earners | Business owners, ABN holders | Those with cash, low tax rate |
What is a Novated Lease?
A novated lease is a three-way agreement between you, your employer, and a finance company. Your employer deducts lease payments from your pre-tax salary, reducing your taxable income. Running costs like fuel, servicing, insurance, and registration can also be packaged pre-tax.
Key Benefits of Novated Leasing
- Tax savings: Payments come from pre-tax salary, reducing your taxable income
- Running costs included: Fuel, servicing, insurance all pre-tax
- GST savings: Only pay GST on the residual, not full purchase price
- Portability: Take the lease with you if you change employers
- Budgeting: Fixed fortnightly deduction covers everything
The FBT (Fringe Benefits Tax) Component
The employer may be liable for FBT on the car value. Using the Employee Contribution Method (ECM), you can make post-tax contributions to reduce or eliminate FBT. Most novated lease providers structure packages to minimize the net cost to you.
What is a Chattel Mortgage?
A chattel mortgage is a business loan secured against the vehicle. You own the car from day one, while the lender holds a "mortgage" over it until you've repaid the loan.
Key Benefits of Chattel Mortgage
- GST claim: Claim back the GST on purchase if registered for GST
- Depreciation: Claim depreciation on the vehicle (business use)
- Interest deductible: Business can claim interest as an expense
- Balloon payment: Option for lower monthly payments with lump sum at end
- Ownership: You own the vehicle from day one
Who Should Consider It?
Chattel mortgages are ideal for self-employed individuals, sole traders, partnerships, and companies that use vehicles for business purposes. The tax benefits come from claiming business expenses rather than salary packaging.
Important Considerations
- • Luxury Car Tax (FY 2025-26): Applies to cars over $91,387 (fuel-efficient, ≤3.5 L/100km) or $80,567 (other vehicles). LCT rate 33% on the GST-inclusive amount above the threshold.
- • FBT Cap: Novated lease benefits are reduced for cars above the FBT threshold
- • Electric vehicles: BEVs and FCEVs under $91,387 are FBT exempt. PHEVs lost the exemption from 1 April 2025 (grandfathered pre-1 Apr 2025 leases only).
- • Residual value: You must either pay the residual, re-lease, or sell the car at end of term
- • Employment changes: Consider what happens if you leave your employer