The electric vehicle (EV) novated leasing trend is more than just an eco-friendly shift; it's a financial game-changer for a growing number of Australian households. In this article we explore the drivers behind the surge in demand for EV novated leases and why HR leaders need to pay attention with Rohan Martin, CEO, National Automotive Leasing & Salary Packaging Association (NALSPA).
Understanding the EV shift
Whilst green credentials are important, the impacts of rising cost of living are taking centre stage. The average Australian household is spending 17% of its income on transportation, after costs increased by more than three times the national inflation rate in 20231. The financial rationale for choosing an EV novated lease is compelling. Rohan highlights, "with rising fuel and cost of living costs, more Australian households are switching to EVs, especially when they can access significant tax savings on a EV through a novated lease as well as save on maintenance and running costs”.
This economic advantage, combined with the environmental benefit of lower emissions, is persuading more Australians than ever to make the switch.
Who are the early adopters?
EVs are notably popular among households located in middle to outer suburban areas. Rohan mentions, "EVs aren't really an inner-city phenomenon. It's those located in middle to outer suburban areas that are rapidly embracing EVs." Householders living in these areas often have the necessary space or facilities to charge their vehicle at home and clearly they can see the immediate benefits of cost-saving on longer commutes.
A perk only available to employees
According to Rohan "Novated leasing now accounts for more than 40% of all electric vehicle purchases in Australia." This makes sense when you consider the significant cost savings available to employees. He explains, “In very simple terms it's about being able to step into a $65,000 EV for approximately what it would cost you to own and operate a $40,000 petrol or diesel car because of the FBT exemption available for EV novated leases."
In this example, the Tesla 3’s driveaway price is over $25,000 more than the Mazda CX-5, yet the cost per week is the same.
What’s getting in the way for employees?
Despite the growing popularity of EVs, hurdles such as the sticker price of an EV, driving range anxiety, and charging infrastructure concerns persist. Rohan suggests re-framing the decision, "A lot of people make decisions about the car they buy based on what they do a couple of times a year. They think about the 1 to 2-3 long distance trips versus the reality of daily life. It's estimated that on average most Australians travel a maximum of 37km a day"
Rohan adds "Once people test drive an EV, and then understand the full benefits and savings associated with EVs, especially through novated leases, their apprehension diminishes considerably," he explains. Education is crucial for dispelling myths and encouraging a more widespread adoption of EV novated leases by Australian employees.
The role of HR in driving change
To make the most of the EV revolution it’s crucial employees know what’s available to them. Yet a recent Maxxia pulse survey showed 60% of respondents were not aware the EV novated lease discount is available to their employees. "HR has a pivotal role in making sure employees are aware of the financial upside of switching to an EV novated lease," says Rohan. He adds "It's also about seizing the opportunity to enhance employers’ sustainability credentials in a very effortless manner."
Discover how to make the most of the EV novated leases to engage your employees, boost their potential tax savings and deliver on your sustainability initiatives in our guide to the electric car discount for employers.
^ Savings shown are indicative and reflect estimated tax savings over the full-term of the lease. The total amount saved is a comparison between a novated lease based on the assumption outlined above and the purchase of a vehicle and payment of running and maintenance costs using post-tax earnings. Actual savings will depend on personal circumstances and may vary depending on the vehicle model and price. Calculations are based on current income tax rates and thresholds and will be subject to change from 1 July 2024 when the Commonwealth Government’s Stage 3 Income Tax Cuts take effect.
1. Drive, Household transport costs skyrocketed in 2023, March 2024
