Electric cars have gone from novelty to normal. Drive down any Australian street and you will spot Teslas, BYDs and a growing crowd of others humming past the servo without a second glance. If you are tempted to join them, there is one thing worth knowing up front: financing an electric car is not quite the same as financing a petrol one.
Get it right and there is a tax break that can save the right buyer thousands. Get it wrong and you can miss out, or pay over the odds. The sums on running costs, depreciation and charging all work differently too. Here is how electric car finance actually works in Australia, the big tax break and its catches, and six smart moves to make before you sign.
How electric car finance works
At its simplest, you can finance an electric car the same way you would any vehicle. A standard car loan, secured against the car, spreads the cost over a term of one to seven years, and it is open to everyone from employees to the self-employed. Businesses can finance an EV through a commercial car loan or chattel mortgage, the same structures they use for any work vehicle.
But electric cars have one extra option that petrol cars do not, and it is where the real savings live: salary packaging the car through a novated lease with your employer. That route opens up a generous tax concession, so it is worth understanding before you default to a straight loan.
The big one: the electric car FBT exemption
This is the headline reason EV finance gets so much attention. Since 1 July 2022, eligible EVs provided through an employer, including via a novated lease, are exempt from fringe benefits tax. In plain terms, the private use of the car is not taxed the way a petrol company car would be, and that can translate into thousands of dollars saved over a lease.
According to the ATO’s electric cars exemption, to qualify the vehicle must be a battery electric or hydrogen fuel cell car, first held and used on or after 1 July 2022, and valued below the luxury car tax threshold for fuel-efficient vehicles, which is $91,387 for the 2025-26 year. It must also never have been subject to luxury car tax. The exemption even extends to running costs like registration, insurance and charging.
Two catches to note. First, plug-in hybrids lost their eligibility for new arrangements from 1 April 2025, so only full battery electric and hydrogen cars now qualify. Second, the benefit is reportable on your income statement, which can affect things like government payments and HECS-HELP repayments. The Government has also announced the exemption will be wound back in phases from 2027, so the rules are shifting. This is genuinely a see-your-accountant topic, because the saving depends entirely on your salary and circumstances.
6 smart moves before you finance an electric car
Whether you go the novated route or a straight loan, these six moves keep your electric car finance on the right track.
1. Check whether the FBT exemption is actually within reach
The exemption only works if you are an employee who can salary package through your employer, and only on an eligible battery EV under the price threshold. If you are self-employed, between jobs, or eyeing a car above the threshold, it may not apply, and a standard car loan could be the better path.
2. Weigh a novated lease against a car loan
A novated lease can be the cheapest way into an eligible EV for a salaried employee, thanks to the tax break. A car loan is simpler, is not tied to your employer, and suits everyone else, including the self-employed and businesses. Neither is universally better. It comes down to your situation and the numbers.
3. Ask about green or EV car loan discounts
Some lenders now offer green or electric car loans with a discount for low-emissions vehicles. It is not universal and the size of any discount varies, but it is worth asking, because on a straight loan it can shave a bit off your rate. Our guide to car finance rates covers what drives the number.
4. Do the sums on running costs, not just the sticker price
EVs usually cost more to buy but less to run. There is no petrol to buy, fewer moving parts to service, and charging at home is generally cheaper per kilometre than filling up. Build those savings into your thinking, but be honest that the higher purchase price means a bigger loan up front.
5. Mind depreciation and the battery
The EV market is moving fast, and some models have depreciated sharply as newer, cheaper cars arrive. Check the resale outlook before you commit, especially if you are considering a balloon payment, and look at the battery warranty, since the battery is the most expensive component to replace.
6. Sort out charging before you buy
A home charger is a real cost, often a couple of thousand dollars installed, though it pays for itself in convenience and cheaper charging. If you cannot charge at home, map out the public charging near you, because relying on public chargers changes the running-cost maths.
Can you finance a used electric car?
Yes, and it can be smart buying. Because EVs have depreciated quickly, a near-new used one can be sharp value, and lenders finance used EVs much as they do any used car, though older vehicles and very high kilometres can tighten your options. There is a tax wrinkle worth knowing if you are salary packaging: a used EV can still qualify for the FBT exemption, but only if it was first held and used by its original owner after 1 July 2022 and was never subject to luxury car tax. An EV that was on the road before that cut-off will not qualify, no matter how cheap it is now, so check the vehicle’s history against those conditions before you count on any tax saving.
Financing an electric car for your business
If the car is for your business, an EV can be financed through a business car loan or a chattel mortgage, just like any work vehicle. Businesses can also provide FBT-exempt EVs to employees through novated lease arrangements, which is a big part of why EVs have taken off in salary packaging. As with anything tax-related, the structure that suits depends on your circumstances and your accountant’s advice.
Is an electric car worth financing?
For the right buyer, absolutely. A salaried employee packaging an eligible battery EV through a novated lease can come out well ahead once the tax break and lower running costs are counted. For everyone else, an EV can still stack up on running costs alone, as long as you go in clear-eyed about the higher purchase price and the depreciation risk. As always, the smart move is to compare the total cost, not just the monthly repayment. The Moneysmart car loans guide is a solid neutral place to sense-check the numbers.
Where a broker comes in
Financing an electric car means weighing more moving parts than a petrol car: the loan itself, the possible tax break, running costs and resale. As an accredited finance broker, Get A Loan compares car loan options across our panel of more than 70 lenders and helps you work out what genuinely suits, and our service is free for you. For the novated lease and FBT side, that runs through your employer’s salary packaging, and it pays to loop in your accountant.
For the wider picture, our main car finance guide is a good companion, and if you already have a loan on a car, it is worth checking whether you could refinance your car loan onto a better deal. Whatever you decide, it is always worth reading our warning about borrowing before you commit.
Electric car finance checklist
- You can finance an EV with a car loan, a business loan, or a novated lease.
- Eligible battery electric cars via a novated lease are exempt from FBT, which can save thousands.
- The car must be below the luxury car tax threshold and first used after 1 July 2022.
- Plug-in hybrids no longer qualify for the exemption on new arrangements.
- Ask lenders about green or EV loan discounts on a straight car loan.
- Weigh the higher purchase price against lower running costs, and factor in charging.
Final Thoughts
Electric car finance rewards a bit of homework. The FBT exemption is one of the most generous concessions going for eligible buyers, but it only applies through the right structure on the right car, and the rules are tightening. Whether you salary package an EV or finance one with a straight loan, do the full sums, get tax advice where the numbers are big, and you will drive away knowing you made the smart call rather than the flashy one.
Disclaimer
The information in this article is general in nature and does not take into account your objectives, financial situation or needs. It is not personal advice, tax advice, legal advice or a recommendation to apply for any product. FBT and tax rules are set by the ATO and can change, so seek independent financial and tax advice for your circumstances before acting.
Get A Loan Finance Pty Ltd is not a lender. We are an accredited finance broker and work with a panel of lenders and finance providers. Product features, eligibility criteria and availability can change without notice, and all finance is subject to lender approval.
