For most salaried Territorians a novated lease works out cheaper, thanks to pre-tax payments and GST savings.
Because you pay for the car and its running costs from your pre-tax salary and save the GST on the purchase price and running costs. A car loan is simpler and has no employer involvement, but everything is paid from your take-home pay after tax. Which one is right depends on your situation. AANT Salary Packaging is the Northern Territory's local provider and can help you compare the two for your own income and vehicle.
How each one works
A car loan is money you borrow to buy a car. You own the car, you repay the loan from your after-tax pay, and you cover fuel, servicing, registration and insurance separately, also from after-tax money.
A novated lease is an agreement between you, your employer and a financier. Your employer deducts the lease payments from your salary before tax, and the payment bundles the finance and the running costs into one amount. Because it comes out pre-tax, and because you avoid GST on the car and its running costs, the overall cost is often lower.
The key differences
- Where the money comes from: car loan from your take-home pay, novated lease from your pre-tax salary.
- GST: on a car loan you pay GST on the car and running costs; on a novated lease you generally do not.
- Running costs: a car loan covers the car only; a novated lease can bundle fuel or charging, servicing, tyres, registration and insurance into the one payment.
- Employer involvement: a car loan involves no employer; a novated lease needs an employer that offers salary packaging, which many NT agencies do.
- End of term: with a loan you simply own the car; with a novated lease you pay the residual value to keep it, trade it in, or start a new lease.
Which one suits you?
A novated lease tends to suit you if you earn a salary, your employer offers salary packaging, and you want your running costs handled in one predictable payment. It is especially popular with NT Government employees for that reason. A car loan can suit you if you are self-employed or your employer does not offer packaging, or if you simply prefer to own the car outright with no employer in the picture. If you are not sure, the AANT team can run the numbers both ways for your income and chosen car.
See it for yourself
The clearest way to compare is with real numbers. Use the AANT novated lease calculator to estimate your fortnightly cost and savings against a car loan in about a minute or talk to the AANT team for a personalised comparison.
Common questions
- Is a novated lease better than a car loan?
For many salaried Territorians, yes, because the pre-tax payments and GST savings usually make it cheaper overall. A car loan can be the better fit if you are self-employed or your employer does not offer salary packaging..
- Do you save more with a novated lease or a car loan?
A novated lease usually saves more, because you pay from pre-tax income and avoid GST on the car and running costs. The exact difference depends on your salary, the vehicle and your kilometres.
- Can I switch from a car loan to a novated lease?
In some cases, yes, through a sale and leaseback. The AANT team can tell you whether your current car qualifies.
