An EV could be more affordable than you think. Here’s why

If you’ve looked at an electric vehicle (EV) recently and ruled it out on price, you’re not alone. While interest in EVs continues to grow, cost remains one of the biggest barriers for many Australians. The upfront costs can feel out of reach, particularly when compared to a petrol or diesel equivalent. But what many drivers don’t realise is that the way you pay for an EV can make a meaningful difference to affordability.

That’s where novated leasing comes in.

For eligible employees, a novated lease can be one of the most cost-effective ways to get behind the wheel of an EV, particularly while the Federal Government’s Electric Car Discount remains in place.

What is a novated lease?

A novated lease is an arrangement between you, your employer and a leasing provider that lets you pay for a vehicle through your salary.

Instead of paying for everything out of your take-home pay, repayments and running costs are deducted before tax. That means you pay less income tax, and you don’t pay GST on the vehicle or its running costs.

For many drivers, it also makes budgeting easier. Rather than juggling multiple bills throughout the year, vehicle-related expenses can sit together in one regular repayment.

How novating an EV stacks up

Under the Electric Car Discount, eligible battery electric vehicles accessed through a novated lease remain exempt from fringe benefits tax (FBT). FBT is the tax that would otherwise partially offset your salary sacrifice savings. Without it in the picture, every dollar of your car’s finance and running costs, including insurance, registration, tyres and servicing, comes entirely out of your pre-tax salary. Already, it’s easy to see why eligible EVs can unlock a much stronger financial outcome than many people expect.

That’s a tax advantage that simply doesn’t exist for petrol or diesel cars. And the real-world savings are significant. Depending on your salary and the vehicle you choose, you could save upwards of $40,000 in tax^ over a five-year lease term. Some models, like the Audi Q4 e-tron or BMW iX1 come in closer to $50,000^ in savings over the same period.

On top of that, an EV costs around 31% of what a petrol or diesel equivalent costs to “fuel”. Fewer moving parts, less servicing, no oil changes. The running cost argument for EVs is already strong, and a novated lease amplifies it considerably.

What’s happening with the Electric Car Discount?

The Electric Car Discount has understandably raised a lot of questions recently.

The discount has been under review and the Government recently confirmed it will continue, with some changes phased in from 2027. Until March 2027, the current full FBT exemption applies to eligible EVs priced under the luxury car tax threshold of $91,387. From April 2027, the full exemption will apply to EVs priced at $75,000 and under, with EVs above that (but below the luxury car tax threshold) receiving a partial 25% FBT discount instead.

What that means in practice is simple. If you’re considering novating an EV, the window for the most generous version of this incentive is open now and won’t be forever. Industry body NALSPA has been actively campaigning to protect the policy, recognising how much it has moved the dial on EV accessibility for everyday Australians. Since the discount launched in 2022, EV uptake through novated leasing has exceeded all early projections and that’s not a coincidence.

So, what does novating an EV actually look like?

The process is more straightforward than most people expect. You choose your vehicle, and your leasing provider sets up the arrangement with your employer. Your repayments, along with a budget for your running costs, are then deducted from your gross salary each fortnight before tax is calculated so you have regular repayments that cover everything. No surprise bills for rego or tyres.

Eligible EVs are battery electric vehicles priced below the luxury car tax threshold. The current market has a solid range of options across SUVs, sedans and hatches from brands like BYD, Polestar, Kia, Tesla, Hyundai, BMW and Audi (to name a few).

If you live in certain areas, you may save further again. Several state and territory governments still offer additional EV incentives, from stamp duty exemptions to registration discounts, on top of the federal benefit.

The part people often miss

When most people calculate whether they can afford an EV, they look at the sticker price and stop there. A novated lease changes the maths entirely. The question isn’t whether you can afford the car outright, it’s what it costs you week to week, after tax, after GST savings, after lower fuel and maintenance costs. Framed that way, an EV through a novated lease often comes in cheaper than a petrol or diesel car bought the conventional way.

Ready to see what you’d actually pay?

If you’re eligible for novated leasing through your employer, it’s worth taking a closer look before ruling an EV out. You may find it’s more achievable than you think. A novated lease calculator can be a useful place to start, helping you compare costs and better understand potential savings based on your circumstances.

Speaking with a novated leasing specialist like SG Fleet can help cut through the noise and show how the numbers stack up in real life, not just on paper.

Disclaimers:

Novated lease comparison

^Estimated income tax and GST savings over a 5-year novated lease term (unless otherwise stated), compared to a non-packaged personal finance arrangement. Assumptions used to calculate potential savings available from SG Fleet upon request.

Comparison based on 2025-26 income tax rates. The examples are provided for your information and to illustrate scenarios. The results should not be taken as a substitute for independent professional taxation and financial advice. For the purposes of this example, we have not taken into account the impact of salary sacrificing gross salary for fringe benefits on the calculation of your superannuation guarantee contributions. This calculation also does not take into account the impact of any tax offset to which you may be entitled. All reasonable care has been taken in preparing these materials; however, SG Fleet Group provides no warranties and makes no representation that the information provided is appropriate for your particular circumstances or indicates you should follow a particular course of action.