Is Salary Sacrificing a Car Worth It? (2025 Guide)

TL;DR

Salary sacrificing a car — also known as salary packaging — can be a smart way to potentially save on tax, bundle your car costs, and simplify your budget. It’s often worth it for people on moderate to higher incomes who want predictable expenses and access to newer or more efficient cars through a novated lease.

But as with any finance option, it depends on your income, driving habits, and the type of car you choose.

What Does Salary Sacrificing a Car Actually Mean?

Salary sacrificing, or salary packaging, lets you use some or all of your before-tax salary to pay for your car and its running costs through a novated lease, depending on the car you choose.
Instead of covering expenses from your take-home pay, some of your regular payments are deducted before-tax — making it easier to budget and potentially reducing the amount of income tax you pay.

That payment includes the finance for the car — new, used, or even your current one — along with ongoing expenses such as fuel or charging, registration, insurance, servicing, and tyres. All these costs are bundled into one regular payment that’s automatically deducted from your pay.

(If it’s an EV, you can also include the cost of a home charger and installation.)

Because you’re paying before-tax, your taxable income is reduced, which could lower the amount of income tax you pay.

It’s one of the few financial arrangements where convenience and potential tax savings meet — and that’s why salary sacrificing remains so popular among Australian employees.

The Real Benefits — and Why It Could Be Worth It

When managed properly, salary sacrificing a car through a novated lease can deliver a mix of tax, financial, and lifestyle benefits.

Tax efficiency

Your lease payments and running costs are paid from some or all your before-tax salary, which may reduce your taxable income. You could also save GST on the car purchase and ongoing expenses, depending on your Employer’s policy.

For many people, that means they could be taking home more of their pay — without changing how they use their car.

If you decide to salary sacrifice an eligible electric car (EV) thanks to the Federal Government’s Electric Car Discount, you could make all your payments before-tax. Which means you could save thousands more in income tax.

Predictable budgeting

All your regular car costs are bundled into one easy payment each payday, so you’ll always know what’s coming out of your pay each cycle. That makes it easier to plan ahead and avoid surprise expenses like registration or major servicing.

Instead of paying for each car bill separately, a novated lease spreads those costs evenly across the year — making cash flow steadier and less stressful.

Convenience and control

Fleetcare manages everything from your finance approval and insurance renewals to scheduled servicing reminders. You can even view your expenses and budgets online, making it easier to track what’s been spent and what’s left in your lease account.

Compared to a car loan

While a traditional car loan may appear simpler upfront, it doesn’t include ongoing running cost expenses. With a novated lease, your running costs are pre-budgeted and paid from some of your before-tax income, which makes it easier to manage day-to-day expenses.

You’re not just financing a car — you’re financing peace of mind and predictable costs.

When It’s Not Worth It

Salary sacrificing a car isn’t for everyone — and being upfront about that helps people make better decisions.

If you’re on a lower income or pay little to no income tax, the tax savings may not be significant enough to outweigh the lease setup and management costs.

Similarly, if you drive very few kilometres each year or don’t plan to stay with your employer long-term, a novated lease might not deliver the same value.

It’s also important to remember that a novated lease is a financial commitment. If you change jobs or your employment ends, your lease doesn’t automatically disappear — you’ll need to transfer it to a new employer, buy out the lease, or have Fleetcare help you restructure it.

That said, Fleetcare’s team can guide you through these options and help assess whether a novated lease suits your situation before you commit.

Electric Cars and the 100% Before-Tax Advantage

If you’ve been thinking about switching to electric, salary sacrificing can make the jump even easier.

Eligible electric and plug-in hybrid cars may qualify for the Electric Car Discount, allowing for 100% before-tax payments on eligible zero and low-emission cars that meet Australian Taxation Office (ATO) requirements.

This means you won’t pay Fringe Benefits Tax (FBT) on eligible EVs — a major saving that makes the running costs of an EV comparable, or even cheaper, than many petrol cars.

With a Fleetcare novated lease, you can bundle your charging, rego, insurance, tyres, and servicing into one simple before-tax payment. Fleetcare also supports home charger setup and provides access to Australia’s largest public charging network through Chargefox.

Because electric cars often have lower maintenance costs and retain value well over time, they could offer even greater savings throughout the lease.

Example: How the Numbers Stack Up

Let’s look at a practical example using Fleetcare’s current calculator figures.

Example 1:

Here’s a quick example:
If you’re earning $85,000 annually and choose to salary sacrifice a car over 5-years, drive 15,000kms per year, the amount you spend on your car each pay could be significantly lower than paying for the same car and expenses after tax.

Exact savings vary depending on your income, car type, and driving habits — but many drivers find salary sacrificing helps make their next car affordable and ongoing budgeting more convenient.

Thanks to salary sacrificing, Fleetcare’s vehicle discounts and GST savings over the 5 years you could save over $15,900 and pay around $223 per week.