How a novated lease affects your home loan borrowing capacity

By changyang1230 and Leonard Nagawidjaja · Published 22 September 2026

“Will a novated lease wreck my borrowing capacity?” is one of the most frequently asked questions I receive, and until now it is the one I have been least equipped to answer. The commonly repeated rule of thumb — a leased car costs you about three times its value in borrowing power — gets quoted constantly, but I had never seen it tested against an actual lender servicing calculator.

So I asked someone who runs those calculators for a living. The modelling and the core write-up below were contributed by Leonard Nagawidjaja of AA Finance Solutions, an MFAA-approved credit adviser with over 15 years in the industry (Australian Credit Licence #462491), who ran a matrix of scenarios through the Bankwest and Macquarie servicing calculators at my request. His section is presented essentially as he wrote it; the results grid, the explanation of the three assessment methods, and the commentary that follows are mine, with Leonard’s calculations.

Every scenario is built around one of two real, similarly-priced mid-size SUVs:

The car loans finance the full drive-away price with no deposit, so wherever a loan amount appears below it is also the car’s price. The borrower earns $130,000 — with one scenario repeated at $300,000 — and is buying at 80% LVR.

Novated lease vs car loan: how it affects your borrowing capacity

By Leonard Nagawidjaja, AA Finance Solutions

When purchasing a vehicle, many clients focus on the tax savings of a novated lease or the interest rate of a car loan. However, when you’re planning to buy a property, the more important question is:

How will the lender assess the commitment, and what impact will it have on borrowing capacity?

Based on the modelling below, the answer can be surprisingly different from what most people expect.

The starting point

For a single applicant earning $130,000 per year, borrowing capacity without any vehicle finance was modelled at:

• Bankwest: $683,000
• Macquarie: $690,000

Assumptions include:

• Single applicant
• No dependants
• Living expenses based on lender HEM
• $200 per month vehicle maintenance allowance already included

Option 1: traditional car loan

The model used a car loan at 6.49% p.a. plus a $15 monthly fee. With a loan of $60,789 and a loan term of 5 years, the total repayment is $678.49 per fortnight (consisting of $555.07 per fortnight for the loan and $123.42 per fortnight for running costs).

Borrowing capacity impact:

Compared to having no vehicle finance:

• Bankwest capacity reduced by $156,250
• Macquarie capacity reduced by $185,000

The reason is simple: lenders assess the loan repayment as an ongoing financial commitment that reduces disposable income available for mortgage repayments.

Option 2: EV novated lease

In comparison, a borrower who took an EV novated lease under a similar repayment:

• EV novated lease
• 5-year term
• 15% interest rate
• Pre-tax deduction of $682.45 per fortnight

Borrowing capacity impact:

Compared to the traditional car loan:

• Bankwest capacity increased by $33,950
• Macquarie capacity increased by $63,000

What about higher income earners?

At $300,000 income, the difference becomes much smaller.

Bankwest

• No car: $1,445,550
• EV novated lease: $1,363,150

Reduction: approximately $82,400.

Macquarie

• No car: $1,440,000
• EV novated lease: $1,360,000

Reduction: approximately $80,000.

For higher-income borrowers, the lease deductions represent a much smaller percentage of income, so servicing is less affected.

Why does the novated lease perform better?

Both sides of this comparison run for the same term: a five-year car loan against a five-year EV novated lease, sized to a similar repayment. Term matters a great deal here — a shorter lease raises the fortnightly payment and worsens the result — so the two are held level at five years.

It is commonly assumed that the benefit comes solely from reducing taxable income. In reality, that is only part of the story.

For the EV novated lease:

• Gross salary remained $130,000
• Salary sacrifice was $17,743.70 per annum
• Taxable salary reduced to $112,256

The reduction in taxable income helps, but the larger factor is often how the lender assesses the lease repayment itself.

If a lender recognises the tax-free nature of an EV novated lease, the borrowing capacity impact can be relatively modest.

If a lender simply treats the salary sacrifice as a liability, much of the tax benefit disappears for servicing purposes.

Key takeaway

For borrowers planning to purchase a property, a vehicle finance decision can have a significant impact on borrowing capacity. Based on this modelling:

• A traditional car loan reduced borrowing capacity the most.
• An EV novated lease generally produced a better servicing outcome.
• Longer lease terms performed better than shorter terms.
• Lender policy plays a major role in the result.
• The way the lender assesses the novated lease is often more important than the tax savings themselves.

Bottom line: if you’re considering both a property purchase and a new vehicle, it is worth reviewing the servicing impact before committing. The cheapest vehicle finance option is not always the option that provides the strongest borrowing capacity outcome.

The three ways a lender can treat a novated lease

Everything above hinges on Leonard’s last point, so it is worth making explicit — not least because the $560,700 and $568,000 lease figures he quotes are the favourable treatment. The same lease assessed the other way comes out at $503,150 and $500,000, which is worse than the car loan. A car loan is unambiguous: it is a debt with a repayment, and every lender treats it the same way. A novated lease is not a debt in your name at all — it is a deduction from your payslip — and lenders have genuinely different views about what to do with it.

The modelling was run three times, once for each treatment:

(Figures shown are for the 5-year, 9% EV lease. $589.57 per fortnight × 26 = $15,329 per year.)

Two things follow from this arithmetic:

• Method 1 is the punitive one. It gives the borrower no credit whatsoever for the tax the sacrifice saves them, while still charging them the full repayment. At Bankwest it lands within $1,000 of the equivalent car loan ($527,600 against $526,750) — which is the point: under Method 1, a novated lease is just a car loan with extra steps as far as servicing is concerned.
• Methods 2 and 3 are arithmetically identical for Bankwest, and close for Macquarie. Adding back $15,329 of non-taxable income and then subtracting a $15,329 liability nets to zero, so both approaches land in the same place. They differ at Macquarie only because of how that calculator applies buffers and haircuts to income versus liabilities.

The full modelling grid

Leonard’s article quotes the headline numbers. Below is everything the model produced, so you can see the spread rather than just the favourable corner of it.

Each capacity figure carries a second line: how much borrowing power the scenario costs against that lender’s no-car baseline, and what that loss works out to as a multiple of the car’s drive-away price ($60,789 for the BYD, $58,807 for the RAV4).

Every lease and loan payment in these tables is a link. Each one opens the calculator loaded with the exact inputs that produced it — car price, term, effective interest rate, running costs, income — so you can check the derivation, or change one field and see what it does to the payment. The lender capacity columns are Leonard’s servicing-calculator output and are not reproducible here.

Bankwest — $130,000 single applicant

Macquarie — $130,000 single applicant

$300,000 single applicant

Only the 5-year, 9% EV lease was modelled at this income level.

Assumptions behind every row. The cars are the BYD Sealion 7 Premium ($60,789.25) and Toyota RAV4 GXL Auto eFour ($58,807) introduced at the top, each financed at full drive-away price with no deposit. Single applicant, no dependants. Living expenses set at the lender’s HEM benchmark: a $2,520 per month base for Bankwest and $2,400 for Macquarie at the $130,000 income level, and $4,190 at $300,000. A $200 per month vehicle maintenance allowance is already built into the expense figure in every row, including the baseline — so the “no car” row is a person who runs a car, not a person who does not own one. Everything else in the applicant’s profile is held constant across rows, so the differences shown are attributable to the vehicle finance alone.

What the numbers actually say

1. The assessment method swings the result more than anything you control

Take the 5-year, 9% EV lease at Bankwest. Under Method 3 it costs you $105,650 of borrowing capacity. Under Method 1 it costs you $155,400. That is a $49,750 difference produced by nothing but a data-entry convention — same borrower, same car, same lease, same lender.

At Macquarie, the two-year lease rows are starker still: $340,000 under Method 1 against $550,000 under Method 3. A $210,000 spread.

This is the single most important finding in the whole exercise, and it is uncomfortable, because it is the one variable a borrower has no control over. You can choose the car, the term and the provider. You cannot choose how the lender assesses your situation as reported.

2. The “3× the car” rule of thumb is roughly right — for a car loan

This was the claim I most wanted to test, and the modelling is set up to test it cleanly: each car loan finances the car’s full drive-away price, so the amount borrowed is the car’s value.

So the folklore holds up well for conventional car finance — 2.6× to 3.2× across four combinations, with 3× sitting squarely in the middle.

For the five-year novated leases the multiple ranges from 1.7× to 3.1×, and which end you land on is decided almost entirely by the assessment method: the generous treatments cluster around 1.7–2.1×, the punitive one around 2.6–3.1×. In other words, a novated lease assessed favourably beats a car loan by roughly a full car; assessed punitively it is no better. The two-year leases are worse again, for the reason in the next point.

Nobody should take much comfort from any of this. Whichever way it is assessed, a ~$60,000 car removes somewhere between $105,000 and $190,000 of borrowing power on a $130,000 income.

3. Longer leases are better for servicing — the opposite of the usual risk advice

A 2-year lease has a much higher fortnightly payment than a 5-year lease on the same car, and servicing calculators only care about the payment. At Bankwest, stretching a 9% EV lease from 2 years to 5 years recovers $48,650 (Method 1) or $33,100 (Method 3) of capacity.

Macquarie is where this gets alarming. Its two-year lease rows under Method 1 cost $350,000 and $370,000 of capacity — 5.8× and 6.1× the price of the car. Nothing else in the entire grid comes close, and it is the combination of the two worst factors: the shortest term, which maximises the fortnightly payment, assessed by the method that gives that payment no tax recognition at all.

This cuts directly against the advice in lease length and risk, where shorter leases reduce your exposure to early termination, policy change and job loss. If you are buying property, those two considerations point in opposite directions, and you will have to decide which risk you would rather carry.

4. The interest rate inside the lease costs you twice

Going from 9% to 15% on the same 5-year EV lease costs $24,450 (Method 1) or $16,650 (Method 3) of Bankwest capacity. The lease rate is already the least transparent number in a novated lease quote; this is one more reason to extract it and negotiate it rather than accept the first quote.

5. An ICE novated lease behaves worse than it looks

The ICE lease has the smallest pre-tax deduction of any lease row — $220.81 per fortnight — and the highest taxable income. It still lands below every 5-year EV lease under Methods 2 and 3.

The reason is the Employee Contribution Method: $417.20 per fortnight of that lease is paid from post-tax salary to extinguish the FBT liability. Post-tax money buys no tax benefit at all, so under every assessment method it behaves exactly like a car-loan repayment. The FBT exemption on EVs is not just a tax saving — it is also what keeps the whole payment on the pre-tax side of the ledger, where a lender can give you credit for it.

6. Higher incomes dilute the effect, but do not remove it

At $130,000, the 9% EV lease costs 15.5% of Bankwest capacity. At $300,000, the same lease costs 5.7%. The lease is a roughly fixed dollar amount while income is not, so it consumes a smaller share of the surplus. This is consistent with how novated lease benefits generally scale with income — it is one of the few areas where the two effects point the same way.

What to do with this if you are buying a house

• Get the servicing test run before you sign the lease, not after. A broker can model your actual numbers in ten minutes. A four or five-year lease commitment cannot be unwound cheaply — see what happens on early termination.
• Ask the specific question: how does this lender treat a salary-sacrificed novated lease? “Does a novated lease affect borrowing capacity?” gets you a useless yes. You want to know whether the deduction is entered as a liability, whether the sacrificed amount is added back as non-taxable income, and whether the answer differs between the lenders on your shortlist.
• If the gap is a deal-breaker, the order of operations matters. Settling the mortgage first and starting the lease afterwards is the standard advice for a reason. The reverse order is what costs people six figures of capacity.
• Do not forget the second-order effects. For an FBT-exempt EV, the lease also raises your adjusted taxable income via RFBA, with flow-on consequences for childcare subsidy, HELP repayments and Division 293 — none of which show up in a servicing calculator.
• Separate this decision from the tax question entirely. Borrowing capacity is not a cost you can net off against the lease saving, and the “tax saved” figure on your quote was never measuring this in the first place. Run the financial comparison in the calculator, then treat the servicing impact as a separate constraint that either fits your plans or does not.

About the contributor

Leonard Nagawidjaja is a dedicated finance broker committed to helping individuals, families, and businesses achieve their financial goals with confidence. With extensive experience over 15 years in the industry, across home loans, investment lending, asset finance, and refinancing solutions, Leonard takes a personalised approach to every client relationship. He understands that no two financial situations are the same and works closely with clients to find tailored lending strategies that suit their needs and long-term objectives. Known for his professionalism, transparency, and attention to detail, Leonard is passionate about simplifying the finance process and delivering exceptional outcomes from application through to settlement.

B.Bus, Dip. Fin · MFAA Approved Credit Adviser · Australian Credit Licence #462491 · Leonard’s profile at AA Finance Solutions

I am grateful to Leonard for running this modelling and writing it up. This site carries no advertising and sells no leads; the link above is a credit, not a referral arrangement, and I receive nothing if you contact him.

None of this is credit advice. Every servicing calculator is proprietary, every lender’s treatment of salary sacrifice differs, and all of these figures depend on assumptions that will not match yours. Nothing here is a commitment from Bankwest, Macquarie, or any other lender. See the full disclaimer.