Which Vehicle Delivers the Best Value Through Salary Packaging?
For many Australians, the idea of a novated lease suggests a brand-new car straight from the dealership. While a new vehicle remains a popular choice, it is not the only way to enjoy the financial benefits of salary packaging. Eligible used vehicles can also offer excellent value, giving drivers more flexibility to find a car that suits both their lifestyle and budget.
While a new vehicle offers the latest features and warranty coverage, a quality used vehicle may deliver better overall value by reducing depreciation and lowering upfront costs. Understanding how both kinds of vehicles compare is the first step towards making an informed decision about which option offers the best value through salary packaging.
New vehicles continue to appeal to drivers for good reason. They often come with the ability to personalise the exact specifications or colours you want, the latest safety technology, and comprehensive manufacturer warranties. When combined with a novated lease, eligible employees can salary package finance repayments and many running costs using pre-tax income. This helps reduce taxable income while simplifying vehicle expenses.
While these benefits provide valuable budget certainty against unexpected repair bills, they must be weighed against the higher purchase price of a new vehicle compared to used. They must also be weighed against the reality that new cars lose a significant portion of their value the moment they leave the dealership, a process known as early depreciation.
New cars typically lose around 30% of their value in the first three years of ownership. While this may not concern someone planning to keep their vehicle for many years, it can increase the overall cost of ownership. By comparison, buying a used car means this steep initial drop in value has already occurred, helping you maximise the value of your budget.
Because this initial depreciation has already taken place, buyers can often access a higher-specification model for a similar budget or purchase an equivalent model at a lower price. Quality used vehicles are also typically available sooner than factory orders, reducing wait times. For many people, this combination of lower depreciation, greater affordability and faster availability makes used vehicles well worth considering.
One of the biggest misconceptions about novated leasing is that the Fringe Benefits Tax (FBT) exemption only applies to brand-new electric vehicles (EVs). Under current Australian Taxation Office (ATO) rules, eligible used battery electric vehicles (BEVs) may qualify for the exemption provided they meet specific eligibility requirements, including:
It is also important to note that plug-in hybrid EVs (PHEVs) generally ceased being eligible for new FBT exemptions from 1 April 2025.
This gives more people the opportunity to combine the lower purchase price of a used BEV with the potential tax benefits available through salary packaging, significantly improving the overall value of an eligible used BEV. Along with lower purchase costs and reduced depreciation, drivers may also benefit from the typically lower running and maintenance costs associated with EVs.
Choosing between a new and used vehicle is no longer about the sticker price, it is about evaluating the total cost of ownership and how it fits with your budget. For some drivers, a brand-new vehicle offers the reassurance of full warranty coverage and the latest safety technology. Others may find that a quality used vehicle delivers stronger overall value through lower depreciation, faster availability and a more affordable purchase price.
By weighing upfront costs against running expenses, expected depreciation, and tax savings, both new and used cars can offer significant benefits when combined with salary packaging. Furthermore, eligible used EVs provide even greater flexibility by potentially qualifying for the same FBT exemption as eligible new models.
The right choice ultimately depends on your budget, driving habits and financial goals.
Whether you’re looking for the latest technology or the value offered by a quality used vehicle, comparing both options can help you maximise your budget and make the most of your novated lease. The team at Prosperity Smart Drive can help you compare your options, estimate your potential savings and find the vehicle that best suits your needs.