Most people finance a new car one of two ways: they take out a personal loan, or they save up and buy it outright. Both feel straightforward. But for anyone who earns a salary and pays tax, there’s a third option that can often save you thousands over the life of owning the car – salary packaging it through a novated lease.
A novated lease lets you bundle your finance and running costs into one payment that comes out of your pre-tax income. That structure is where the savings come from. Interested to see if novated leasing is really cheaper than buying a car outright or taking out a personal loan? We’ve run the numbers below so you can make an easy comparison.
To understand how novated leasing is cheaper than taking out a personal loan or buying outright, let’s look at a practical example.
Our example buyer earns $150,000 a year. They want to buy a 2026 MG IM6 Premium EV, priced at $57,990 drive away. They drive 10,000 kilometres a year and plan to keep the car for five years.
We’ve compared what they would pay across a novated lease, taking out a personal loan or buying outright. Each figure covers the total cost of owning the car, including both paying for the vehicle and covering its monthly running costs like charging, insurance, and servicing.
With a personal loan, our example person would pay the highest vehicle payment of the three options at $1,148 per month. Add $460.32 in running costs and they’re $1,608.32 out of pocket each month, or $96,499.20 across five years. A personal loan in this scenario is the most expensive path.
Alternatively, buying outright would mean they skip any interest and loan fees, but would still have to cover the same running costs from their after-tax pay. Over five years, they would spend $85,609.20.
With a novated lease, the person’s monthly vehicle payment sits in the middle at $1,055.36, but the five-year outgoings drop to $51,953.40. These significant savings are driven by two main factors:
Even after accounting for the final residual payment of $16,403.75 at the end of the five-year lease, the total cost of ownership is $68,357.15. Compared to buying outright, the novated lease saves them more than $17,000, and it’s more than $28,000 less than borrowing money for a personal loan.
| Cost category | Novated lease | Personal loan | Buy outright |
|---|---|---|---|
| Monthly vehicle payments | $1,055.36 | $1,148.00 | $966.50 |
| Monthly running costs | $493.32 (includes management fee) | $460.32 | $460.32 |
| Monthly tax savings | $649.79 | Nil | Nil |
| Monthly impact on take home pay | $865.89 | $1,608.32 | $1,426.82 |
| Total outgoings over five years | $51,953.40 | $96,499.20 | $85,609.20 |
| Residual payment | $16,403.75 | Nil | Nil |
| Tax savings over five years | $38,987.40 | Nil | Nil |
| GST saving on purchase | $4,977.22 | Nil | Nil |
| Total savings over five years | $43,964.62 | Nil | Nil |
| Total cost of ownership (includes running costs) | $68,357.15 | $96,499.20 | $85,609.00 |
Disclaimer: This calculation does not constitute financial advice. Estimates are based on a 2026 MG IM6 Premium EV valued at $57,990 drive away, travelling 10,000 km per annum over a 60-month term on a salary of $150,000. Personal loan figures come from MoneySmart.gov.au calculator at 7% with $0 fees. Buy outright monthly repayments are based on the cost of the car divided into monthly amounts over five years.
A novated lease is a smart option for many eligible drivers. That being said, factors like salary, vehicle price and type, lease term, annual kilometres and running costs, finance rates and management fees all must be considered.
The residual payment is also an important part of a novated lease. In the example above, the residual payment is shown separately but included in the total cost of ownership. Before choosing an option, it is important to understand the end-of-lease arrangements and whether the vehicle and salary packaging structure suit your circumstances.
Our team at Prosperity Smart Drive
can help you navigate these financial options with clarity and confidence. Get in touch with our team to compare your options, estimate your potential savings, and structure a lease that maximises your available tax benefits.