Study finds novated lease reduces perceived EV price barrier in Australia

According to a study by Novated Lease Australia, Australians would consider switching to a fully-electric vehicle if it was salary-sacrificed under a novated lease.

The survey claims to use an independent panel of 1000 Australians across all states, except the Northern Territory and Tasmania, with a representative age and geographical spread and was commissioned by the novated leasing company.

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Novated leases increasing interest

It found that 46 per cent of respondents would consider an EV if it was under a novated lease arrangement with their employer – where the vehicle and running costs are deducted from their pre-tax salary.

Depending on the financial case, it could lower employees' annual payable tax bracket too.

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Younger Australians tend to prefer switching to an EV under a salary -sacrificed novated lease, with 59 per cent of under 30 year-olds indicating they would switch compared to 32 per cent of over 51 year-olds.

The Federal Government is also now waiving the Fringe Benefits Tax (FBT) on eligible full EV and plug-in hybrid models priced under the Luxury Car Tax threshold.

It aims to encourage EV uptake from company fleets and employers that offer novated lease programs for employees to create a larger and cost-competitive used EV market in the future.

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Perceived price barrier

Australians were interested in salary sacrificing EVs since 84 per cent of participants perceive initial purchase price as the major barrier to adoption, despite lower long-term ownership costs.

Novated Lease Australia claims such arrangements can save owners more than $5000 after five years on car running costs, which is helped by the FBT exemption.

While not all models are pricier than comparable combustion-engined-powered models, EVs generally carry a 10 to 50 per cent price premium due to expensive and resource-limited raw materials to produce large battery packs.

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Older Australians surveyed were more cost-conscious; however, 15 per cent of respondents didn’t believe EVs are too expensive – which applies to a higher proportion of younger Australians and South Australia residents.

“Our research highlights that novated leases are on the rise this year. Electric vehicle prices still have a long way to go… yet an increasing proportion of the public and business sector are becoming more carbon conscious,” Novated Lease Australia founder Shaun McGowan said.

“Perhaps now is the time for organisations that are sustainability-minded to add novated lease agreements for electric vehicles into their decarbonisation strategies.”

According to the National Automotive Leasing and Salary Packaging Association, novated leases are estimated to be used in one in 10 new-car sales annually Down Under.