It is common to see a novated lease quote with a monthly finance rental and a completely different fortnightly payroll deduction. That does not automatically mean one of the numbers is wrong.
The first question is: are they even measuring the same thing?
Contractual finance rental
The finance rental belongs to the vehicle lease. It is determined by the amount financed, finance rate, payment schedule and residual.
The GPS Novated Lease Calculator treats this as a finance cash flow.
Payroll deduction
A payroll deduction can reflect more than the finance rental. Depending on the package, it can incorporate:
- finance;
- salary-packaging administration;
- fuel or charging budgets;
- servicing and tyres;
- registration and CTP;
- insurance;
- pre-tax/post-tax contribution treatment.
It can also be spread over your employer's weekly or fortnightly pay cycle even when the contractual finance rental is monthly.
Finance-only conversion example
Consider 34 monthly contractual rentals of $1,463.74 over a nominal three-year lease.
Total contractual rentals:
34 × $1,463.74 = $49,767.16
There are approximately 78 fortnights in three years. Spreading the finance rentals only across those payroll cycles gives:
$49,767.16 ÷ 78 ≈ $638.04 per fortnight
That $638.04 is a mathematical payroll-frequency equivalent of the finance rentals. It is not evidence that the lease contract itself contains 78 fortnightly finance rentals.
Why this matters when solving the interest rate
If you take a payroll deduction containing running costs and feed it into a finance-rate solver as if it were the contractual lease rental, the implied rate will be meaningless.
Before reverse-engineering a quote, identify the finance-only rental and the exact number of contractual rentals.
A reconciliation checklist
Ask the provider for:
- the amount financed;
- the contractual finance rental and frequency;
- the number of finance rentals;
- the residual including GST;
- a breakdown of the salary-packaging deduction;
- which running-cost numbers are budgets rather than fees.
Then use the novated lease rate calculator for the finance layer.
About the author: KK Neelamraju is a finance and credit professional and an Authorised Credit Representative through GPS Finance Group.
GPS Finance Group (CRN 000575797) is an Authorised Credit Representative of AFAS Group Pty Ltd (ACL 414426). AFCA Member ID 119860. General information only. Credit approval and pricing are subject to lender assessment. Tax-sensitive information should be checked against current ATO guidance and, where appropriate, with a qualified tax adviser.
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