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How to read a novated lease quote

This page explains how to interpret a novated lease quote, identify common pitfalls, and compare proposals meaningfully.

What a novated lease quote actually represents

A novated lease quote typically combines:

  • vehicle financing
  • tax concessions (income tax, FBT, GST)
  • running-cost budgets and the derived savings when paid using pre-tax income

Many of the numbers shown are estimations, not guaranteed outcomes. Most importantly, the quoted outcomes assume continuous employment and uneventful leasing for the entire lease term.

Do not treat a quote as a guaranteed cost

A novated lease quote assumes that employment, tax settings, and vehicle use remain stable for the full lease term.

If these assumptions fail, outcomes can change significantly.

The numbers people focus on (and why they mislead)

“Tax saved”

Quotes often headline a large "tax saving" figure.

This number:

  • does not represent net financial benefit,
  • is based on a hypothetical benchmark of how much the same lease would cost if paid entirely with post-tax income,
  • and may include “tax savings” on items you would not otherwise have purchased outside a lease structure (e.g. lease protection insurance).

See: why “tax saved” is misleading

High tax savings do not imply a good deal

Tax saving is not synonymous with net saving.

The correct question is whether the net outcome beats realistic alternatives.

It is entirely possible for a quote touting huge "savings" figure to in fact be a net loss when compared to a realistic alternative as I explore in this article.

Interest rate vs "base" rate

This is a poorly regulated area and one of the most common sources of confusion.

Effective interest rates in novated leases:

  • are defined inconsistently between providers,
  • are often calculated on different bases,
  • and are often not comparable to rates derived using a standard amortisation schedule.

Compounding this problem, some providers prominently advertise a so‑called “base rate”, particularly when the true effective interest rate would look unpalatable if disclosed.

For example, a quote may claim a “base rate” of 8.79%, while the effective interest rate — once hidden brokerage fees are included — exceeds 14%. Providers using this practice often decline to disclose a true effective interest rate.

The base rate is largely meaningless in isolation when thousands of dollars of additional fees are embedded into the financed amount.

Given how many novated lease providers provide inconsistent and artificially low "interest rate", I recommend not relying on these self-reported figure, but instead using a standardised method such as the one incorporated in this site's calculator.

See: Why novated lease interest rates are inherently unreliable

Do not reject or accept a quote based on interest rate alone

A lower interest rate can still produce a worse overall outcome. A quoted “8%” can easily translate to 11% or higher when calculated using standard amortisation methods.

Company A's 8% could sometimes be more expensive than Company B's 10%.

Fortnightly deductions

The deduction shown on a quote is not a fixed cost.

It includes:

  • vehicle financing
  • running-cost budgets

Running costs are budgets, not spending.

Therefore, when comparing fortnightly deductions between two quotes, either compare only the vehicle finance + admin (and ignore all other running-cost portions), or take care to ensure that both quotes use identical running cost estimates.

See: running costs as a piggy bank

Do not compare deductions between quotes directly without reconciling running-cost budget discrepancies

Different quotes may assume different running-cost budgets, making overall deductions non-comparable.

The numbers that actually matter

Financed amount: is it clean?

The financed amount should broadly equal:

  • drive-away vehicle price
  • plus documentation fee
  • minus GST savings (up to the annual statutory cap — currently $6,334)

If the financed amount cannot be reconciled, the quote is incomplete and may contain undisclosed brokerage. Ask your novated lease consultant to explain their derivation of the financed figure if it does not match the above.

Many novated lease providers incorporate the first-year comprehensive insurance premium into the financed amount. Reject this if possible and insist on claiming the comprehensive insurance under "running costs".

When the insurance premium is included in the financed amount, it attracts interest over time, and may also contribute to worse payout figures in the event of early termination.

Bundled add-ons inflate financing

Insurance, servicing, or accessories bundled into the financed amount increase interest and early-termination risk.

Running costs: budgets vs real costs

Running costs should:

  • reflect realistic usage
  • pass through GST savings where applicable

See: - ATO 4.2c/km shortcut - failure to pass GST savings

Skipping charging or running-cost claims leaves money on the table

Claiming running costs almost always results in a financial advantage compared to not claiming, all else being equal.

Removing them because you "charge cheaply anyway" is a mathematical error – read more in the 4.2c/km shortcut article.

Total vehicle lease cost (excluding running costs)

To compare quotes meaningfully, focus on:

  • vehicle finance payment
  • admin fees
  • residual value

Exclude running costs — these are typically equivalent regardless of which provider you use, because the amount you ultimately claim is determined by your vehicle use, not by the leasing company.

This total is what you should compare against:

  • buying with cash
  • buying with a loan

Drawbacks not mentioned in quotes

Super guarantee

Some employers calculate superannuation contributions based on post–novated lease income rather than your pre‑salary‑packaging salary. The specific calculation method needs to be explicitly clarified with your payroll department.

If superannuation contributions are calculated on post-novated lease income, this can result in a significant reduction in employer super contributions, potentially amounting to many thousands of dollars over the life of the lease.

While this practice is not common (estimated at around 5–10% based on informal polling), it represents a non‑trivial downside risk.

If this applies in your case, the lost super should be incorporated into your overall cost–benefit analysis.

Always check how your payroll calculates your super guarantee

You could lose many thousands in your super if the contribution is based on your post-NL income.

Impact on HECS / childcare subsidy / child support / Div 293

This impact is often buried in fine print — or omitted entirely — despite being one of the most financially significant side effects of a novated lease.

Novated leases interact with Adjusted Taxable Income (ATI) through reportable fringe benefits, which in turn affects:

  • HECS/HELP repayment amount
  • childcare subsidy (CCS)
  • child support assessments
  • Division 293 tax liabilities, among others.

The direction of the impact depends on the FBT treatment of the lease:

  • FBT‑applicable (typically ICE vehicles): adjusted taxable income is reduced, which often improves outcomes (lower HECS repayments, higher subsidies).
  • FBT‑exempt (EVs): reportable fringe benefits increase ATI, which can worsen outcomes (higher repayments, reduced subsidies).

Use the calculator to estimate changes in your adjusted taxable income, and assess downstream effects on repayments and subsidies before accepting a quote.

See: adjusted taxable income explained

Always check how novated lease affects your government liability and subsidy

You could lose thousands in subsidies, particularly under an EV (FBT‑exempt) novated lease.

A 10-minute sanity checklist

Before accepting a quote, ask:

  • Can I reproduce the financed amount from first principles?
  • Are insurance and other add-ons bundled into my financed amount, and do I want or need them?
  • Am I being quoted a “base rate” or a properly calculated effective interest rate?
  • Is the reported effective interest rate calculated using a transparent methodology?
  • Is GST passed on for eligible running costs?

Using the calculator to validate a quote

The novated lease calculator is designed to:

  • strip out running-cost noise
  • validate the effective interest rate
  • compare net outcomes across pathways
  • help estimate potential unstated downsides (e.g. loss of super guarantee and government subsidies)

Key takeaway

A good novated lease quote is not defined by its headline numbers, but by whether its assumptions survive scrutiny.

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If it has helped you think more clearly, avoid a costly mistake, or saved you meaningful money, you’re welcome to support its ongoing maintenance and improvements: