Car loan or novated lease — and the Luxury Car Tax, automatically.
Switch between a standard car loan and a novated lease, add a balloon payment if you want one, and see the Luxury Car Tax calculated automatically against the ATO's current thresholds.
Standard secured car loan
Lowers the repayment, but you still owe it at the end
Monthly Repayment
$721
60 months \u00b7 7.48% comparison rate
Amount Financed
$36,000
Total Interest
$7,261
Total Paid
$52,261
Always compare the comparison rate, not just the advertised rate \u2014 it includes most fees and is the true cost, required by law.
Most car loans in Australia come with a fixed rate — around 69% of them, per Mozo's 2026 market data — which meant most existing borrowers were insulated when the RBA lifted the cash rate three times in 2026, taking it to 4.35% by May. For anyone taking out a new loan today, the Reserve Bank's own lenders' statistics put the average secured car loan rate for prime borrowers at 7.48% p.a. as of July 2026, with the broader market running anywhere from about 5.5% for the strongest credit profiles up to the mid-teens for weaker ones.
Whatever rate a lender advertises, Australian consumer credit law requires a second number alongside it: the comparison rate, which folds in most fees to show the loan's true annual cost. Two loans with identical headline rates can have meaningfully different comparison rates, and that second number — not the advertised one — is what actually determines which is cheaper.
Australia has a financing option most other markets simply don't offer: the novated lease. It's a three-way agreement between you, your employer, and a finance company, where your car's lease payments — and often its running costs, like fuel, insurance, and servicing — come out of your pre-tax salary through salary packaging, directly reducing your taxable income. You do still pay interest, typically a bit higher than a standard car loan at around 8–12% p.a. in 2026, and it's calculated on the GST-exclusive purchase price rather than the full sticker price. The real saving isn't in the headline rate; it's in the tax treatment. For someone in the 37% tax bracket, an effective 9.5% novated lease rate can work out closer to a 5% real cost once the pre-tax structure is accounted for — which is why it can beat a lower-advertised-rate car loan on total after-tax cost, even though it looks more expensive on paper.
Electric vehicles get a specific, generous novated lease benefit: under the Treasury Laws Amendment (Electric Car Discount) Act 2022, a battery electric vehicle priced below the luxury car tax threshold — $91,661 for the 2026–27 financial year — can qualify for a full Fringe Benefits Tax exemption on a novated lease, meaning the employer-provided benefit isn't taxed at all. Plug-in hybrids don't get this exemption and are taxed under standard FBT rules instead, a distinction worth knowing before assuming a PHEV qualifies the same way a full EV does.
7.48%
RBA average secured car loan rate, prime borrowers (Jul 2026)
33%
Luxury Car Tax rate on the amount over the ATO threshold
$80,809
LCT threshold, non-fuel-efficient vehicles, FY2026-27
The Luxury Car Tax itself catches more buyers than its name suggests. It's a federal tax of 33%, charged only on the portion of a car's GST-inclusive price above a set threshold — $80,809 for most vehicles and $91,661 for fuel-efficient ones in 2026–27, under the ATO's official rates. The formula works out to (price − threshold) × 10⁄11 × 33%: a $100,000 non-fuel-efficient car, for instance, attracts LCT of roughly $19,191 × 10/11 × 33% ≈ $5,758. It applies to new cars and demonstrators up to two years old, including the cost of any accessories or customisation fitted before delivery, but excludes separate government charges like stamp duty and registration. The threshold sits low enough that plenty of well-specified mainstream SUVs and utes cross it once options are added, not just exotic imports.
Stamp duty is the other cost that varies more than buyers expect, since every state and territory sets its own structure rather than following one national rate. Western Australia, for example, uses a tiered scale running from 2.75% on cars under $25,000 up to 6.5% on higher-value vehicles, while other states apply their own value- or weight-based formulas — most electric and lower-emission vehicles attract a discounted rate or a concession in several jurisdictions. Because this varies so much by state, and by vehicle emissions category within each state, it's worth checking your own state transport authority's current rate directly rather than assuming a single national figure applies.
ASIC's own 2026 review of more than 350,000 car finance loans (Report 26-132MR) found issues with how some lenders handled loan establishment, reinforcing why comparing the comparison rate — not the advertised one — and reading the full cost breakdown matters in this market specifically, not just as general advice.
Amelia earns $95,000 a year and wants a $45,000 new SUV. With a 7.48% comparison rate, a $9,000 deposit (20%), and no balloon, financing $36,000 over 60 months gives a monthly repayment of roughly $721. If she adds a 30% balloon payment ($13,500) instead, she's still financing the same $36,000, but $13,500 of it is deferred to a lump sum at the end rather than paid off monthly, cutting the repayment to around $535 a month — she'll still owe that $13,500 at the end, as a payment, a trade-in, or a refinance, so the balloon lowers the monthly cost without lowering the debt.
The lending market splits between the big banks — Commonwealth Bank, Westpac, NAB, and ANZ — digital and non-bank lenders like Macquarie, Harmoney, and Money3, and manufacturer captive finance such as Toyota Finance, alongside dealer-arranged financing at the point of sale. Comparison sites and brokers can check multiple lenders' rates without affecting your credit score, which is generally worth doing before accepting whatever a dealer quotes on the day.
The RBA's own data puts the average secured car loan rate for prime borrowers at 7.48% p.a. as of July 2026. The broader market runs 5.5% to mid-teens. Always compare the comparison rate, not just the advertised rate.
A three-way agreement between you, your employer, and a finance company, paid from pre-tax salary. The effective rate is typically higher (8–12%), but the after-tax cost can work out lower once salary packaging is accounted for.
A federal 33% tax on the portion of a new car’s GST-inclusive price above $80,809 (most vehicles) or $91,661 (fuel-efficient), FY2026-27. Applies to new cars and demonstrators up to two years old.
Yes — a BEV priced below the luxury car tax threshold can get a full FBT exemption on a novated lease. Plug-in hybrids don’t qualify.
It varies by state. WA, for example, runs 2.75% to 6.5% on a tiered scale; other states use their own formulas, often with EV discounts.
A portion of the loan deferred to a lump sum at the end, lowering the monthly repayment without reducing what you owe overall — you still have to pay, refinance, or trade in against it.
Reviewed by Evelyn John, Auto Sales Expert. Rates and figures checked against RBA lenders' interest rate statistics, ATO Luxury Car Tax rates and thresholds, and ASIC Report 26-132MR.