How to use the Novated Lease Calculator

A Novated Lease Calculator is a tool that estimates the likely periodic payment, running-costs and a simple pre-tax deduction/tax-saving estimate when an employee acquires a car under a novated lease (a three-way arrangement between employee, employer and financier)

What the calculator does (short)

This calculator estimates:

• the finance repayment portion (with a balloon/residual),
• running costs per pay period (fuel, servicing, insurance),
• an estimated annual pre-tax deduction, and
• a simple estimate of yearly tax “saving” based on your marginal tax rate.

It does not replace detailed novated-lease quotes or ATO/FBT calculations — those depend on employer packaging choices and FBT treatment. See ATO FBT resources.

Why use a novated lease calculator?

• Compare novated packaging against buying with a loan or paying cash.
• Understand the cashflow impact per pay period (weekly/fortnightly/monthly).
• Get a ballpark of possible tax benefit before asking your payroll/novated provider for a formal quote. Industry calculators and providers (e.g., vehicle fleet companies) show how variable inputs change the outcome.

Inputs explained (what to enter in the calculator)

1. Vehicle purchase price — total on-road price including dealer delivery, registration estimate and stamp duty if included in your package.
2. Deposit / trade-in value — any upfront money that reduces the financed amount.
3. Lease term (years) — typically 2–5 years, sometimes longer; term affects residual and payments.
4. Interest rate (APR) — the finance rate offered by the lease provider.
5. Residual / balloon % — percentage of purchase price left as a lump-sum at lease end; many providers / ATO guidance provide typical percentages by term (example ~46.88% for some 3-year examples). Always confirm the exact residual with your financier.
6. Running costs (annual) — fuel, insurance, servicing, tyres, registration and other running expenses you want included in the package.
7. Annual kms (optional) — used by some calculators to estimate fuel costs and to determine whether excess-km charges may apply.
8. Your marginal tax rate — used only to give a simple pre-tax saving estimate (note: FBT may offset part or all of this saving).
9. GST claim option — if the employer claims GST credits, that may reduce net costs; the calculator provides a simple 10% estimate if you choose that option. See ATO GST guidance for novated leases.

How to use it — step-by-step

1. Enter the realistic on-road price for the exact vehicle/options you plan to novate.
2. Enter any deposit or trade-in value you will provide up-front.
3. Choose the lease term your provider offers and enter their quoted residual % (don’t use a guessy number). Many novated-leasing providers or ATO guidance publish typical residuals.
4. Put in a realistic annual running-cost figure. If you’re unsure, estimate fuel + insurance + servicing + rego for your typical usage.
5. Input your estimated marginal tax rate and whether your employer/finance provider will claim GST.
6. Choose your repayment frequency (monthly/fortnightly/weekly) to see cashflow impact per pay period.
7. Click Calculate and view: loan amount, residual, repayment per pay period, running cost per pay period, annual pre-tax deduction, an approximate tax saving and a simple GST offset estimate.

Interpreting the outputs

• Total per period = finance repayment + running cost per period. That’s the amount typically taken as a payroll deduction under salary packaging (pre-tax), subject to your employer’s packaging arrangement.
• Annual pre-tax deduction = what your taxable income is reduced by (approx). Multiply this by your marginal tax rate for a very rough estimate of income tax saved. But remember: novated arrangements often create a car fringe benefit and your employer may be liable for Fringe Benefits Tax (FBT), which reduces the net benefit. Check the ATO’s FBT car calculator for taxable value specifics.

Example (quick)

• Vehicle price: $40,000
• Deposit: $2,000
• Term: 3 years, interest 6.5% p.a.
• Residual: 46.88% (example)
• Annual running costs: $6,000
• Marginal tax rate: 34.5%

Result (approx from the provided HTML tool): you’ll see the finance repayment per period, running costs per period and an annual pre-tax amount. The simple tax saving estimate is just that — simple — and doesn’t include FBT; speak with payroll or a novated provider for the full, employer-side FBT picture.

Limitations & points to double-check with provider / payroll

• FBT (Fringe Benefits Tax): novated leases are treated as car fringe benefits in many cases; taxable value and the FBT payable depend on whether the statutory formula or operating cost method is used and on actual usage. Use the ATO FBT car calculator for precise taxable value estimates.
• Residual values: the residual your financier recommends may be different from simple %-tables; always confirm exact residual and how it’s calculated.
• GST: employer claiming GST credits can materially change outcomes—confirm whether GST on purchase and running costs will be claimed.
• Employer participation: your employer must agree to a novation and salary packaging — not all employers offer novated leasing. See fleet providers for how they structure packages.

---

C — Expanded notes & practical tips

• Get multiple quotes from novated providers and compare their assumptions (residual %, administration fees, interest rate, inclusions/exclusions).
• If you expect high private use, the FBT can be significant — request employer/payroll run sheets showing expected taxable value. Use the ATO FBT calculator for more accurate employer-side numbers.
• If you drive low-emission or electric vehicles, some states or providers may have different incentives; always verify local incentives and how they interact with novated leasing. (Provider websites often highlight EV incentives.)
• Confirm whether insurance, registration, maintenance are bundled. Bundling increases the convenience but may increase the total packaged amount.
• Remember that taking the vehicle with you if you change jobs requires your new employer to accept the novation or for you to refinance/assume the lease separately — check portability rules in your novation agreement.

---

D — Disclaimer (expanded — please read carefully)

This calculator and article provide a general estimate only and are intended for educational/illustrative purposes. They do not constitute financial, taxation, legal or accounting advice. Novated leasing interacts with Australian tax law (including Fringe Benefits Tax and GST) and employer payroll practices; the actual after-tax benefit of a novated lease depends on many variables outside the scope of this tool: exact lease contract terms, employer packaging policies, the method used to calculate FBT, state-based charges (e.g., stamp duty), and changes to tax law. For accurate outcomes: (1) obtain a formal novated-lease quote from a licensed provider, (2) ask your payroll/HR for employer-specific packaging information, and (3) consult a qualified tax or financial adviser if you need tailored advice. Authoritative ATO resources and FBT calculators should be consulted for final decisions. 

---

E — FAQ: Borrowing Power Calculator (as requested)

(FAQ specifically about a borrowing power calculator — note: this is a general FAQ about borrowing power calculators, not the novated calculator above.)

Q1 — What is a borrowing power calculator?
A borrowing power calculator estimates how much you could borrow from a lender (usually for a mortgage) based on income, expenses, existing debts, interest rate assumptions and loan term. It’s a lender-style affordability estimate — not a guaranteed approval.

Q2 — Which inputs are typically required?
Common inputs: gross income (wages, salary, other taxable income), household expenses, existing loan repayments and credit cards, desired loan term, assumed interest rate, and number of dependants or other commitments.

Q3 — How do calculators treat living expenses?
Some calculators use your entered living-expense figure; others use standardized expense estimates (which can be conservative). Lenders will often apply their own assessment of living costs which may be higher than your personal estimate.

Q4 — Will different lenders give different results?
Yes — lenders use different serviceability formulas, buffers (e.g., +2.5% to the advertised rate), and different ways to treat other debts and income. Always expect variance between lenders.

Q5 — Does a borrowing power calculator equal loan approval?
No. It’s indicative. Formal approval requires a credit check, documentation, and a lender’s full assessment.

Q6 — What is the interest-rate buffer and why does it matter?
Many calculators and lenders include a buffer (e.g., add 2–3% to the actual rate) to test whether you can still afford repayments if interest rates rise. This reduces your assessed borrowing power.

Q7 — How accurately do calculators deal with variable income or bonuses?
Calculators may allow you to enter average or guaranteed income. Lenders tend to be conservative: variable or bonus income may be included only if it’s consistent and verifiable (usually over 12 months).

Q8 — Can I improve my borrowing power?
Yes — common ways: reduce existing debt, lower monthly expenses, increase deposit/savings, lengthen the loan term (reduces repayment but increases total interest), or show stable higher income. Improving credit history also helps.

Q9 — Should I use a broker or apply directly?
A mortgage broker can help compare lender policies and find one matching your profile. Some borrowers prefer going direct; either way, a pre-application discussion with a broker or lender helps.

Q10 — Are online calculators trustworthy?
They’re useful for ballpark planning but vary in assumptions. Use them for planning, then get lender-specific pre-qualification or speak to a broker for firm numbers.