Finding the right vehicle takes research and an EV is no different. Chances are, you've already put the work in to compare models, calculate how much range you realistically need and maybe even narrowed the field to a few favourites. Now comes the next decision - how to pay for it?
While paying cash or taking out a traditional car loan remain familiar options, novated leasing has become an increasingly popular way to finance a vehicle, and for good reason.
What does novating an EV involve?
A novated lease is an agreement between you, your employer and a leasing provider. Your employer makes lease payments on your behalf through salary sacrifice, and your leasing provider manages the finance and administration.
The vehicle is yours to use just as you would if you'd purchased it another way. Whether that's commuting to work, doing the school run or heading away for the weekend, it's your car to enjoy.
Before comparing repayments or settling on your preferred model, it's worth understanding how a novated lease works in practice, and what it means for your finances over the life of the agreement.
With that in mind, here are the key things to consider:
Get clear on your budget
Start by working out what comfortably fits your budget, and that doesn't just mean the purchase price.
The real cost of any vehicle includes registration, insurance, servicing, tyres, charging, maintenance and finance. These ongoing expenses can add up quickly, yet they're easy to overlook when comparing vehicles.
Take two cars with similar price tags. One might cost less to insure, while the other could be cheaper to service, maintain or charge. Over three or five years, those differences could add up, meaning the vehicle that looked more expensive initially could actually cost less overall.
That's where a novated lease can simplify the comparison. Many everyday running costs can be packaged into one regular payment, giving you a clearer picture of what your vehicle is likely to cost over the life of the lease. Rather than budgeting separately for insurance, servicing, or registration throughout the year, expenses are planned from the beginning, giving you the convenience of having fewer separate bills to manage.
Depending on the EV and the arrangement you choose, you may benefit from GST savings on running costs too.
Before you sign: three terms worth understanding
When researching a novated lease, as with any financial product, you may come across some unfamiliar terminology. Before diving into the details, here are three key terms worth knowing:
- Salary sacrifice means your lease payments are generally deducted from your salary before income tax is applied.
- Lease term is the length of your agreement. Many drivers choose somewhere between three and five years, depending on how often they like to change vehicles.
- Residual value is probably the term that causes the most confusion for first-time novated lease customers. It's the agreed value of the vehicle at the end of your lease, calculated in accordance with the Australian Tax Office (ATO) guidelines and the applicable lease term. Think of it as the amount remaining once your regular lease payments finish. Rather than paying off the entire value of the car during the lease period, a residual value amount remains when the lease ends.
At that point, you will generally have several options. Depending on your circumstances, you might choose to pay the residual value and keep the vehicle, refinance your vehicle (subject to finance approval), or trade it in towards your next lease, or sell it.
Together, these terms underpin every novated lease. The more familiar you are with them, the easier it becomes to determine whether it aligns with your driving needs and financial goals.
Think beyond the way you drive today
Before choosing your next vehicle, consider what your driving might look like over the life of the lease, not just the next few months.
It pays to look a little further down the road. Will you continue commuting five days a week? Could weekend road trips become more frequent? Might a growing family change the amount of space you need? Could you install home charging in the future, if not now?
These are the sorts of questions that influence everything from the EV you choose to the lease term that suits you best.
Spending some time thinking ahead can help you choose a vehicle that suits your lifestyle years down the track, not just on the day you collect the keys.
Even so, life doesn't always go to plan. If your driving habits change along with it, some leasing providers, including SG Fleet, can work with you to review your kilometre projections and recalculate your lease where appropriate, helping your budget stay aligned with the way you actually use your vehicle.
Consider what would happen if you changed jobs
Your driving habits can change over the term of the lease, and your job circumstances can too.
Fortunately, changing employers doesn't necessarily mean the end of your novated lease. In many cases, your lease can transfer to your new employer if they also offer novated leasing. If they don't, there are still options available, although the financial arrangements may change, which is why it's worth asking about the possibilities before you commit.
A good leasing provider should explain the different scenarios upfront, so you understand how your lease could be affected if your circumstances change.
The right leasing provider matters
Naturally, much of your attention will be on the EV you're considering and the numbers attached to it, but the leasing provider you choose deserves consideration too.
Beyond helping you structure your lease, an experienced provider may also have access to the fleet purchasing power that individual buyers typically don't, helping secure competitive vehicle pricing before tax savings are even considered.
They can also help you compare vehicles, compare running costs, explain current government incentives, like the Electric Car Discount, and guide you from your first quote through to vehicle delivery, making the process considerably simpler than trying to navigate it on your own.
Put your shortlist to the test
Once you've narrowed down your options, the next step is to see how the numbers stack up.
A novated lease calculator can provide an estimate based on your salary, the vehicle you're considering and your expected running costs. Rather than comparing purchase price alone, you can compare the total cost of driving different vehicles over the life of the lease.
Sometimes the results are exactly what you'd expect. Sometimes they're surprisingly different. Either way, you'll be making the decision with a clearer understanding of what sits behind the numbers.
Finding the right fit
Choosing your next vehicle is a significant financial decision and how you finance it warrants just as much consideration as the purchase price.
For eligible employees, a novated lease can offer a simpler way to manage vehicle costs while unlocking meaningful tax savings. Still, it's important to look beyond the price tag, take the time to understand the total cost of driving, review your options and ask the questions that matter to you.
Running the numbers is one of the best places to start. From there, an experienced provider like SG Fleet can help you understand your options and choose a lease that suits both your budget and the way you drive.
DISCLAIMER: zecar is not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to check how the website information relates to your unique circumstances.
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