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Why doesn’t the interest rate matter so much?

Because the majority of the savings with a novated lease come from the tax benefits, not from a percentage point or two on the interest rate. Also, it’s not like your mortgage – we’re not talking about hundreds of thousands of dollars across 30 years – we’re talking tens of thousands across a couple of years. It’s simple maths, a few percentage points make very little difference.

Let’s use an example to demonstrate, we’ll take the Mazda 3 (with an on-road cost of $25,495) we looked at previously.

For example:
– $25,495 borrowed over three years at 1%. 
Repayments are $719.13 and total repaid is $25,888.00
– $25,495 borrowed over 3 years at 8%. 
Repayments are $799.08 and total repaid is $28,766.88

The difference is only $2,878.

But, if you had a novated lease for three years, 
the total amount repaid would be $22,592.*

A saving of $3,296 on the 1% finance!

Posted by The Autopia Team

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