Why an EV might cost less than you think in 2025
Sticker shock putting you off an EV? A novated lease changes the maths significantly. Here's what most people miss before they rule one out.
If you've looked at the drive-away price of an electric vehicle and quietly closed the tab, you're in good company. EVs still carry a higher sticker price than most equivalent petrol cars — that part is real. But the sticker price is not the price you pay under a novated lease, and that gap matters more than most people realise.
According to EVcentral AU ([Source 1]), a significant number of Australians are ruling out EVs on price before they've done the full maths. The article points to tax treatment and running costs as the two factors most commonly ignored in that calculation — which is exactly where novated leasing does its heaviest lifting.
What this means for novated lease customers
Since 1 July 2022, eligible battery electric vehicles under the luxury car tax threshold have been exempt from fringe benefits tax (FBT) under the Treasury Laws Amendment (Electric Car Discount) Act. That single policy change fundamentally altered the cost equation for PAYG employees who access a vehicle through their employer via salary packaging.
In plain English: under a novated lease, your repayments, running costs (fuel, insurance, registration, tyres, servicing) and the vehicle itself are bundled and paid from your pre-tax salary. For an eligible EV, the FBT exemption means you don't pay the tax that would otherwise apply to having a car provided through your employer. The result is a potential savings outcome that doesn't exist if you just walk into a dealership and buy the same car outright.
Running costs also change with an EV — electricity is cheaper per kilometre than petrol, and EVs have fewer moving parts, which generally means lower servicing costs over time. Those costs sit inside the novated lease package too, all pre-tax. It compounds.
Common questions
Does the FBT exemption apply to all EVs?
No. The exemption applies to battery electric vehicles (BEVs) and hydrogen fuel cell vehicles with a value below the luxury car tax threshold at the time of the first retail sale. Plug-in hybrids (PHEVs) were removed from the exemption from 1 April 2025. Always check the current ATO guidance before signing anything.
Do I need my employer's approval to get a novated lease?
Yes — your employer needs to be a party to the lease agreement. Most mid-to-large employers already have arrangements in place. If yours doesn't, millarX can help set that up.
Is a novated lease only worth it for EVs?
No — a novated lease can work for petrol and diesel vehicles too, though the FBT exemption doesn't apply to those. The pre-tax salary benefit still exists; it's just not as pronounced as it is for an eligible EV.
What happens at the end of the lease?
You typically have three options: pay out the residual value and own the car, trade it in, or refinance into a new lease. Your adviser should walk you through which option suits your situation before you sign.
Is this too good to be true?
It's a legitimate tax concession legislated by the federal government — not a loophole. That said, whether it stacks up for you personally depends on your income, the vehicle you choose, and your employer's set-up. A proper quote is the only way to know.