The deduction from each pay in a novated lease quote reflects the car's price, on-road costs, finance charges, provider fees, running-cost budgets and the end-of-lease residual. Judge the lease on its total cost over the term, not that figure alone.
To check the car itself, ask for its drive-away price on a separate line and compare it with written dealer quotes for the identical variant. The car price feeds the amount financed, the residual and, for cars not exempt from fringe benefits tax (FBT), the tax calculation too.
What sits inside a novated lease quote
Ask the provider for an itemised breakdown in writing, with these lines.
The car: the vehicle price with the exact variant, colour and factory options, plus each dealer-fitted accessory or protection product priced separately.
On-road costs: registration, stamp duty and dealer delivery, shown separately from the vehicle price.
Finance and fees: the amount financed, interest rate, lease term, establishment fee and any ongoing management fee.
Running-cost budgets: fuel or charging, servicing, tyres, registration renewal and insurance, with the yearly kilometres each budget assumes.
The residual: the amount owed at the end of the lease, in dollars and as a percentage.
Lease figures may be shown with or without GST. Ask which, so every comparison uses the same basis.
Pull the car's drive-away price out of the bundle
The vehicle price is the part of the quote you can test against the open market. A higher price means more to finance, and the ATO's minimum residual is a percentage of the car's cost.
In the ATO's car leasing example, a three-year lease on a $40,000 car has a residual of 46.88 per cent, or $18,752.
Price can affect tax too. Under the ATO's statutory formula method, the taxable value of a car fringe benefit starts from the car's base value. That is the cost price paid by the employer or lessor, including GST, any luxury car tax, dealer delivery and fitted non-business accessories, but excluding registration and stamp duty.
The statutory percentage applied to that base value is 20 per cent, unless the arrangement dates from before 31 March 2015. So overpaying for the car can lift your lease payments and residual and, if the car is not FBT-exempt, the taxable value of the benefit.
Ask for the car's GST-inclusive drive-away price, the name of the supplying dealer, and whether the quote is for a specific stock car with a VIN or a factory order. If the provider says the price includes a fleet discount, ask to see it as a line item.
Benchmark that price against independent dealer quotes
Get at least two written drive-away quotes for the identical car: same variant, colour, option packs and registration address. A lower grade or missing option pack can make a quote look cheaper when it isn't the same car. Pricing a BMW iX3, for example? Confirm the exact grade on every quote first.
Carseekers is built for this step. You submit one request for the exact car and authorised dealers respond with drive-away offers, as set out on the how it works page. Our guide to judging a new car quote explains what each line of a written quote should include.
Then ask your provider whether you can nominate the dealer, supply your own quote or have it matched.
Treat every extra as a separate purchase
Quotes can include extras such as window tint, paint protection, a tow bar or an extended warranty. Inside a lease they are financed over the term, and the ATO counts fitted non-business accessories in the base value used for FBT.
Ask for each item on its own line and decide whether you would pay that price in cash. If not, ask for it to be removed.
Running-cost budgets deserve the same check. They are estimates, so look at the kilometres, fuel or electricity prices, servicing schedule and tyre allowance behind them. Ask how overspends are handled during the lease and what happens to any unused amount at the end.
Insurance can be bundled too. Ask whether you can use your own insurer, and compare the bundled premium with your own quote for the same cover.
Read the residual in dollars, not just as a percentage
For a bona fide lease, the ATO says the residual must reflect a reasonable estimate of the car's market value at the end of the lease. Its guidance also says the residual should not be below its minimum residual values, set as a percentage of the car's cost.
ATO minimum residual benchmarks for cars, as of October 2026: 1 year 65.63%, 2 years 56.25%, 3 years 46.88%, 4 years 37.5%, 5 years 28.13%.
These are benchmarks, not an absolute floor. The ATO's residual value determination allows a lower figure where a careful, fair estimate of the car's likely end-of-lease market value supports it. If your quote is lower, ask the provider to explain the valuation in writing, or check with a registered tax agent.
Ask for the residual in dollars and plan how you would deal with it when the lease ends. Loanseekers' novated lease explainer covers the end-of-lease options and the tax side.
If you plan to trade in your current car, get its value in writing separately. The ATO's leasing guidance says a trade-in or employee cash contribution towards the purchase must not reduce the lease payments or residual value, so ask the provider exactly how your trade-in will be applied.
Electric cars and plug-in hybrids: check eligibility at the source
For an eligible electric car, the ATO's electric cars exemption can remove FBT on the car's private use and associated costs such as charging, registration and insurance. One of its four conditions is about price: luxury car tax (LCT) must never have been payable on the car's importation or sale.
The ATO says the car's value must be below the LCT threshold for fuel-efficient vehicles when it is first sold at retail, and in any later sale. As of October 2026, the ATO lists that threshold as $91,661 for 2026-27.
The same page compares the threshold with the car's GST-inclusive LCT value, which generally includes parts, accessories or attachments supplied at the same time as the car. Extras bought with a car priced near the threshold could push it over, so ask the provider to confirm in writing that no LCT is payable on the car as quoted.
In May 2026 the government announced phased changes to the exemption. From 1 April 2027, an EV costing more than $75,000 but below the LCT threshold would get a 25 per cent discount on its FBT instead of the full exemption. The government said existing leases won't be affected.
As of October 2026, the ATO says this measure is not yet law, and its exemption page still describes the current rules. Recheck both before you sign, and ask how your car's cost would be measured against the $75,000 mark.
Plug-in hybrids are different. From 1 April 2025 a PHEV is not a zero or low emissions vehicle under FBT law. Only limited transitional cases keep the exemption, where the PHEV was used or available for use before that date under a financially binding commitment, so a new PHEV lease won't qualify.
Compare the lease with buying the same car on a loan
Use your best written drive-away price for both options, with the same term and the same running-cost assumptions.
For the lease, ask the provider for the total reduction in your take-home pay over the term, then add the residual and anything you pay upfront. For a loan, total any deposit, the repayments, any final balloon, fees and running costs you would pay from take-home pay.
The ATO's salary sacrifice example compares a packaged car with paying the costs yourself on the same basis: net disposable income.
Moneysmart's car-loan guide suggests comparing comparison rates on the same loan amount and term, and notes that a balloon generally raises a loan's total cost. Its salary packaging page says whether packaging is worth it depends on your income, the benefits available and any associated costs, and suggests professional tax advice.
Loanseekers can help you explore car-loan options for the same car; approval and terms depend on lender assessment. This guide is general information only, not tax or financial advice.
Questions to send your provider before you sign
Price: What is the car's GST-inclusive drive-away price, and which dealer is supplying it?
Dealer: Can I nominate the dealer, or will you match a written quote for the identical car?
Extras and budgets: What does each accessory, protection product and running-cost budget cost on its own?
Residual and trade-in: What is the residual in dollars, how was it set, and how will my trade-in be applied?
EV status: Can you confirm in writing that no luxury car tax is payable on the car as quoted?
Total cost: What will the lease cost over the full term, including the residual, compared with a loan for the same car?
The finer details
Your questions answered.
Can a used electric car be FBT-exempt on a novated lease?
It can, if it meets every ATO condition. The car must have been first held and used on or after 1 July 2022, and luxury car tax must never have been payable on it, including at its first retail sale. The ATO says buyers of a second-hand electric car need to work out whether it was ever subject to LCT, so ask for the original sale documents before relying on the exemption.
Does an FBT-exempt electric car still show on my income statement?
It can. The ATO says the private use of an eligible electric car is exempt from FBT but is still a reportable fringe benefit, so your employer works out a notional taxable value for it. Your employer reports the amount if the total taxable value of your fringe benefits is more than $2,000 in an FBT year, which runs from 1 April to 31 March. A reportable fringe benefits amount isn't taxed, but it is included in income tests for some government benefits and obligations, so check with your payroll team or a registered tax agent how it applies to you.
Can a home EV charger be included in a novated lease?
Not as a car expense. The ATO says a home charging station is not a car expense associated with a car fringe benefit, although it may be a property fringe benefit or an expense payment fringe benefit. If a provider offers to package a charger, ask how it will be treated for FBT and price it separately from the car.