Novated leases

What's a good interest rate on a novated lease?

Updated November 2026

Most novated lease quotes don't show an interest rate. They show a finance payment per pay, a running costs budget and a residual. That makes it hard to tell whether the finance is cheap or expensive, and it's the part of the lease where the provider has the most room to make money.

The good news is that the rate can be worked out from three numbers that are on every quote.

How to find the rate in your quote

You need the amount being financed, the finance payment, and the residual.

• Amount financed. The car's price without GST (the leasing company claims the GST back), plus any set-up fees added to the lease.
• Finance payment. The finance or lease rental line, not the total deduction from your pay. The total also includes running costs.
• Residual. The amount you pay at the end to keep the car.

The interest rate is the one that makes those payments and the residual add up to the amount financed. It takes a calculator to solve, which is why the lease checker does it for you.

Check your quoteEnter your numbers and see the real rate, your weekly cost after tax, and how it compares with a car loan.

What to compare it against

A fair benchmark is the rate your bank or a credit union would charge on a secured car loan. If the lease rate is more than about one percentage point higher, ask the provider to match it or get a second quote. Different providers can quote noticeably different finance rates on the same car.

The residual is set by the ATO

The ATO sets minimum residuals for novated leases, as a percentage of the car's cost. A quote with a higher residual has lower payments now but a bigger bill at the end.

You also pay GST on top of the residual when you buy the car at the end.

Fees worth questioning

• Set-up or establishment fees. These are usually added to the lease, so you pay interest on them too. Ask for an itemised list. Large set-up fees are often negotiable.
• Monthly management fees. Small each month but they add up over a five-year lease.
• Bundled insurance. Ask whether you can use your own insurer. It's often cheaper.

Electric cars and the 2027 change

Eligible electric cars under the luxury car tax threshold are currently exempt from fringe benefits tax, which is why EV novated leases can save so much. In May 2026 the government proposed winding this back. From 1 April 2027, EVs priced at $75,000 or more would get only a 25% FBT discount instead of the full exemption, and from 1 April 2029 the full exemption would end for all EVs. The government has said existing leases won't be affected. These changes weren't law at the time of writing, so check the current rules before you sign.

1. ATO, minimum residual values for car leases
2. PwC: Government announces phased changes to the FBT electric car exemption

General information only, not financial or tax advice.