What does a novated lease really cost you?

The saving comes from the order of payment

Nobody sells you the car for less. The price is the price, the finance is finance, and the running costs are what they always were. What changes is the order in which the money and the tax are counted. Ordinarily you are paid, tax comes out, and you buy the car with what survives. Under a lease the car is paid for further up the queue, and the tax is worked out on what is left after that.

That is the whole mechanism, and it has a consequence worth sitting with. The same car is worth a different amount to two different people, because the benefit is a function of the tax that would otherwise have been paid. It moves with your income and with whatever else is measured against your income. This page works that out on your figures instead of quoting you an average.

The agreement is attached to your job

Your employer sits inside the arrangement, and that is the only reason the pre-tax treatment is available at all. It is also the leg most likely to be removed without much notice. Change jobs and the deduction stops working the way it did, while the car and the obligation stay exactly where they were.

None of that is a reason to avoid a lease. It is a reason to ask what happens next before signing, because the answer is not the same everywhere and the question is far easier to ask now than later.

Running costs wait in a pool until the bills arrive

A lease usually bundles fuel or charging, servicing, tyres and insurance into the deducted amount. That money is set aside on your behalf and spent as those bills arrive. It is still yours. While it sits in the pool, though, it is not available for anything else you might have wanted to do with it.

Two things follow. Budget too high and you have lent the arrangement money at no interest. Budget too low and the shortfall turns up as a bill in a year you were not expecting one. The running cost fields above open at market estimates for exactly that reason, and they are meant to be replaced with numbers from your own driving.

An exemption changes the size of the benefit

An exemption that applies to a category of vehicle changes how large the benefit is. It does not change how the benefit is produced. The order shown above is the same for a car that qualifies and a car that does not, which is why the sensible sequence is to understand the structure first and let the vehicle question come second. Switching the vehicle type in the calculator is the quickest way to see what the difference is worth in your case rather than in general.

The comparison worth making

Most people weigh a lease against doing nothing, which is rarely the choice actually in front of them. The useful comparison is the same car acquired the ordinary way, over the same years, driven the same distance. Set the fields to match a real quote and the difference stops being a sales figure and becomes arithmetic you can check yourself.

An estimate is not a quote

The interest rate and running costs here begin as market estimates, marked editable because your real lease will differ. A finance company's offer carries its own rate, its own fees and its own margin, none of which this page can know. Use the calculator to decide whether the structure suits someone in your position. Use the quote, typed into the fields above, to judge the deal itself.

The rules applied here are the rules as they stand in the 2026–27 tax year. Announced changes that are not yet law are deliberately left out, so if you are reading this near a rule change, the calculator is the conservative voice in the room, and that is by design.

Open the pay calculator

Read where each part of a lease payment goes