Guides

A novated lease and your home loan

Checked against the official sources on 20 October 2026.

A car payment cuts how much a bank will lend you for a home. The size of the cut depends on how you pay for the car. This guide shows a rough figure for a novated lease, a car loan and cash.

Treat every number here as a rough guide. Each bank has its own rules, and banks change them.

How a bank works out what it will lend

A bank starts with your pay after tax. It takes off your living costs and your other monthly payments. What is left is the most you can put towards a home loan each month.

The bank then tests the loan at a higher rate than you will pay. The extra is called the serviceability buffer. It checks you could still pay if rates went up.

APRA, the body that oversees banks, expects a buffer of 3 percentage points. With a home loan rate of 6%, the bank tests the loan at 9%. It spreads the loan over 30 years.

At that test rate each $100,000 of home loan costs $804.62 a month. So each dollar of car payment takes a set amount off the loan:

Less to borrow = car payment a month / $804.62 x $100,000

Every $100 a month of car payment means about $12,428 less home loan.

A car loan: the repayment counts

A car loan is the simplest case. The bank sees the repayment and takes it off what you can pay.

Say you borrow $51,600 for the car and stamp duty. At 9% over 5 years the repayment is $1,071 a month. That cuts the home loan by $133,122.

Running costs like fuel stay out of this sum. The bank already takes off living costs, and a car's running costs sit inside those.

A novated lease: two ways a bank can count it

A novated lease is paid from your salary before tax. This is called salary sacrifice. Your employer takes the lease payment out of your pay, then you pay tax on what is left.

The lease payment also covers the car's running costs, such as insurance. The novated lease guide explains how the payment is built.

Banks count a lease in one of two ways:

• The payslip as it is. The bank reads your take-home pay after the lease. The tax you save makes the drop smaller than the payment.
• The salary sacrifice added back. The bank adds the sacrificed pay back to your income. Then it takes off the whole lease payment, as if you paid it after tax.

The first way gives you credit for the tax you save. The second way gives no such credit.

Why the second way can count running costs twice

The whole lease payment holds the car's running costs. In the example below that is $328.90 a month. The bank also takes off your living costs, and those may already allow for a car.

So the same costs can come off your income twice. Ask your bank or broker which way it counts the lease.

Cash: no payment, but a smaller deposit

Paying cash leaves your pay the same. The bank sees no new monthly payment.

The cost shows up in your savings instead. Money spent on the car can't go into a home deposit.

Say the bank wants a 20% deposit. Then each $1 less of deposit means $5 less of home price. A car and stamp duty of $51,600 could mean up to $258,000 less home, if the deposit is what limits you.

The fringe benefit on your income statement

A car from your employer is a perk, called a fringe benefit. Your employer may have to show its value on your income statement. This line is the reportable fringe benefits amount.

It shows once the car's taxable value is over $2,000 a year. The value is multiplied by 1.8868 before it goes on the statement.

A car free of fringe benefits tax can still be reported. In the example the car is valued at 20% of $50,000, or $10,000 a year. The statement shows $18,868.

You pay no tax on this amount. It still counts for some things:

• Medicare levy surcharge. The income test for it includes this amount.
• Study loans. HELP and other study loan repayments.
• Family payments and child support. Both look at income that includes it.

The amount sits next to your salary on the statement. It isn't cash you get. Ask your broker how your bank reads it.

A worked example

The example uses the calculator's starting values:

• Salary. $200,000 a year.
• Car. A $50,000 electric car in NSW, with $1,600 stamp duty.
• Term. 5 years, with a lease balloon of 28.13%.
• Rates. Lease 7.5%, car loan 9%, home loan 6%.

The bank tests the home loan at 9%. That is $804.62 a month for each $100,000.

The two lease rows give a range from $74,295 to $135,377. Where you land depends on your bank.

Counted the second way, the lease cuts more than the car loan. Counted the first way, it cuts less.

Cash leaves the pay alone. The $51,600 spent could still mean up to $258,000 less home price through the deposit.

Put in your own salary, car and rates

How long the effect lasts

The car payment counts for the whole term. In the example that is 5 years. When the car is paid off, the bank stops taking the payment off.

A lease ends with a balloon payment, the amount left owing on the car. In the example it is $14,560, due at the end of the term. If you borrow to pay it, a new repayment starts.

The balloon payment guide covers your choices at the end. The car loan in the example has no balloon.

Tips before you apply for a home loan

• Ask a broker. A mortgage broker can tell you which way your bank counts a lease.
• Think about the order. A lease that starts before you apply lowers the pay on your recent payslips. A lease that starts after the home loan settles leaves that loan as it is.
• Hold off on a new lease while you apply. A new car payment before settlement can change what the bank lends. Ask your broker first.
• Tell the bank about the lease. Bring the lease quote and your latest payslips.
• Try a cheaper car. A smaller payment takes less off the loan.

Try your own numbers in the calculator