Should I use mortgage-offset cash or a novated lease for a car?

Start with two complete cash-flow paths

Paying cash from offset increases mortgage interest. A novated lease can retain cash but adds finance rentals, fees and a residual, with payroll and tax treatment that depends on the vehicle and arrangement. A headline tax saving does not answer which path leaves you ahead.

Worked starting point: $40,000 taken from offset

At a 6% mortgage rate, withdrawing $40,000 from a fully effective offset initially adds about $2,400 a year in interest. That starting figure is not a complete five-year lease comparison. The amount in offset, mortgage balance and salary cash flows can change over time.

What must be included?

• The same car price, ownership period and expected end value.
• Actual lease finance rentals, all fees and the residual needed to own the car.
• After-tax payroll impact and the running costs included in each option.
• Mortgage interest on the changing offset balance and cash remaining at the end.

Use the tool that matches the question

Start with the novated lease quote decoder to separate finance and payroll layers. The cash-versus-car-finance tool is a simpler sensitivity check, not a full after-tax novated-lease model. See the car loan, offset and mortgage comparison for repayment-term examples.

Sources and verification

• ATO — Car leasing and FBT
• ATO — Minimum residual values for leased cars
• Moneysmart — Car loans

General information only. It is not personal financial, tax or legal advice. Finance approval, pricing and structure are subject to lender assessment and your circumstances.