Does a Novated Lease Affect Your Borrowing Capacity? Real Numbers for 2026

A novated lease does reduce how much you can borrow for a home, but usually by less than people fear and by less than a car loan would. One mortgage broker’s modelling of novated lease borrowing capacity, published in October 2026, found a five-year EV novated lease on a $130,000 salary cut home loan borrowing capacity by about $105,000, roughly 1.7 times the car’s price. A five-year car loan on the same car cut it by $156,000 to $185,000.

That’s the short answer. The longer one depends on how your lender assesses the lease, how long the lease runs, your household income and how tight your borrowing already is. “It can be significant” is the reply most buyers get when they ask this online, and it doesn’t help anyone decide. This guide puts dollar figures on the question, and explains how timing your lease around the coming EV FBT changes changes the answer.

Novated leasing is now mainstream. More than 500,000 Australians have one, according to the National Automotive Leasing and Salary Packaging Association (cited by the ABC, April 2026). Many of them will apply for a home loan during the lease.

How lenders assess novated lease borrowing capacity

Lenders count a novated lease in one of two ways, and both reduce what you can borrow. Which one your bank uses changes the result, though less than you might expect.

Method 1: lower taxable income. This is the most common approach. Your payslip shows a smaller taxable salary because the lease is deducted before tax. The lender simply assesses you on that lower figure. For an FBT-exempt electric car, the whole payment comes out pre-tax, so nothing else gets added. Broker modelling found Bankwest and Macquarie both work this way.

Method 2: commitment plus add-back. Here the lender enters your pre-tax deduction as a debt repayment, then adds the same amount back as tax-free income. The modelling found this lands within about $10,000 of Method 1.

The big four banks don’t publish their novated lease policies. So the only reliable way to learn how your bank treats the lease is to ask a broker to run it through that lender’s calculator.

Every lender also tests you at a higher interest rate than you will actually pay. The serviceability buffer is the extra margin lenders add to the loan rate when checking whether you can afford repayments. The Australian Prudential Regulation Authority (APRA) kept it at 3 percentage points in May 2026 (APRA). With the Reserve Bank lifting the cash rate to 4.60% on 29 September 2026 (RBA), typical variable rates sit around 6.3% to 6.9%. That means lenders are testing new borrowers at roughly 9.3% to 9.9%. At those test rates, every dollar of monthly income you lose shrinks the loan by a lot.

How much does a novated lease reduce borrowing power?

Expect a reduction of about 1.3 to 2.6 times the car’s price, depending on lease length and income. The table below uses broker modelling from October 2026. It assumes a single applicant on $130,000, no dependants, an 80% loan-to-value ratio and a BYD Sealion 7 at about $61,000 drive-away, run through Bankwest and Macquarie calculators.

Scenario	Borrowing capacity lost	Multiple of car price
5-year novated lease, 9% interest	About $105,000	1.7x
5-year novated lease, 15% interest	About $122,000	2.0x
2-year novated lease	About $140,000 to $159,000	2.3x to 2.6x
5-year novated lease on a $300,000 income	About $79,000 to $85,000	1.3x to 1.4x
5-year car loan, 6.49% interest	$156,000 to $185,000	2.6x to 3.0x

The 2-year and $300,000 rows are those published multiples applied to the $61,000 car price. Treat them as estimates.

Three patterns stand out. Lease length matters most: stretching from two years to five recovered $33,000 to $35,000 of borrowing power in the modelling. Higher incomes lose less relative to the car, because the tax saving is worth more at a higher marginal rate. And the lease beat the car loan by $60,000 to $80,000, because a car loan is paid from after-tax income.

Other estimates sit close to this range. Australian Credit Solutions puts a $700-a-month lease at $80,000 to $120,000 of lost borrowing power (2026). That works out to about $11,000 to $17,000 less for every $100 a month of lease payments. Education Home Loans modelled a $110,000 teacher with a $13,000-a-year lease plus $8,000 of super salary sacrifice. That borrower’s capacity fell from about $580,000 to between $470,000 and $520,000, depending on the lender (April 2026).

You will also see a higher figure quoted. The ABC reported a rule of thumb of about three times the car’s value in April 2026. That matches the car loan result, not the five-year lease. It’s a reasonable worst case, not the typical outcome.

Worked example: a family planning a first home

Take a household earning $220,000 combined, split $130,000 and $90,000. The higher earner wants an EV around $45,000 to $60,000 on a novated lease, and they plan to borrow $750,000 to $800,000 for a first home within 18 months. This is a common situation, and the numbers above give a usable estimate.

Applying the multiples, a five-year lease on a $45,000 to $60,000 car would cut this household’s capacity by somewhere around $60,000 to $100,000. The lower end applies to the cheaper car and because two incomes dilute the effect. That’s our extrapolation from the modelling, not a lender quote. Whether it matters depends on how much headroom they have.

Two regulatory checks help. First, APRA’s debt-to-income limit has applied since February 2026. It caps bank loans of six times income or more at 20% of each bank’s new lending (APRA). An $800,000 loan on $220,000 is about 3.6 times income, well clear of it. Second, the loan size is ordinary. The average owner-occupier loan was $731,000 in the June quarter of 2026, and first home buyers averaged $614,048 in the March quarter (ABS Lending Indicators).

So if a broker says this household can borrow $900,000 without the lease, losing $80,000 still leaves them above their target. If the broker says $820,000, the lease could push them under. Get that baseline number before you sign anything.

Lease first or house first?

If your borrowing is tight, buy the house first. If you have comfortable headroom, the order matters less. Two things drive this decision: payslips and the FBT timeline.

Lenders want recent payslips. Once a lease starts, every payslip shows the lower taxable salary. Ending the lease doesn’t fix that overnight, because your payslips need time to show the full salary again.

The FBT timeline is the part most people get wrong. Fringe benefits tax (FBT) is the tax employers pay on non-cash perks, and EVs under the luxury car tax threshold of $91,661 for 2026 to 2027 are currently exempt (ATO). The government announced in the May 2026 Budget that the exemption will be wound back. Under the proposal:

• Until 31 March 2027: the full exemption continues for all eligible EVs.
• 1 April 2027 to 31 March 2029: EVs valued at $75,000 or less stay fully exempt. Pricier EVs under the threshold get a 25% FBT discount instead.
• From 1 April 2029: a 25% discount applies to all eligible EVs.
• Existing leases: commitments made while the full exemption applies keep it for the lease term.

This isn’t law yet. Treasury ran an exposure draft consultation from 10 to 28 September 2026 (Treasury), so the details could still change. The practical point holds, though. For a car around $45,000 to $60,000, you don’t need to rush. You can buy the house, settle, and still start a fully exempt lease well before April 2029. Buyers eyeing an EV above $75,000 face a harder trade-off, because the full exemption for them ends with leases signed before 1 April 2027.

How to limit the hit on your home loan

You can’t make the lease invisible, but you can shrink its effect. Five moves help.

Choose a longer term. A five-year lease has smaller payments than a two- or three-year lease, and the modelling showed that alone recovers over $30,000 of capacity. Our novated lease residual value guide explains how a longer term changes the balloon at the end.

Pick the cheaper car. Borrowing power falls in proportion to the car price. A $45,000 EV costs you far less capacity than a $65,000 one.

Stop double-counting running costs. Your lease payment already covers charging, rego, insurance, tyres and servicing. Ask your broker to take those costs out of your declared living expenses. This only helps if your declared spending is above the Household Expenditure Measure (HEM), which is the minimum living-cost benchmark lenders apply. If you’re already at HEM, removing them changes nothing.

Watch the interest rate. The jump from 9% to 15% interest cost about $17,000 of capacity in the modelling. Get a written novated lease quote showing the rate, and compare it with at least one other provider.

Ask the lender question directly. Before you sign the lease, have a broker run your home loan numbers twice, once with the lease and once without. It takes them minutes. That one comparison is worth more than any rule of thumb, including the ones in this article.

What about paying the lease out early?

Paying out a lease to boost borrowing power works on paper but is usually expensive. The payout covers the remaining balance including the residual, any unpaid rentals and an early termination fee. SG Fleet, one of the largest providers, lists a standard fee of $660 including GST, and some providers charge extra rental payments if you exit in the first three years. You may also owe the difference if the car is worth less than the payout figure.

The cash for the payout usually comes from savings you were going to put towards your deposit. A smaller deposit can cost you more than the lease did, especially if it pushes you above 80% loan-to-value and into lenders mortgage insurance.

The residual itself is a separate question. We found no published lender policy treating the balloon as a debt during the lease. It becomes a real cost at the end, when you either pay it in cash or refinance it into a new lease. If that end date falls near a planned home purchase, plan for it.

Novated leases also tend to beat a standard loan on total cost, which our novated lease vs car loan comparison covers in detail. To see what a given car costs you per pay cycle, try our novated lease calculator, or start at the EV novated leasing hub for the full picture.