Your Novated Lease EV Looks Perfect on Paper. Here's the Residual Trap That Could Cost You Thousands.

First, the good news everyone already knows

The EV novated lease boom is real. CommBank reported a 161% lift in demand for electric vehicle finance, driven by rising fuel costs, expanding EV model availability, and the Fringe Benefits Tax exemption on novated leases for zero-emission vehicles. The FBT exemption — which lets eligible employees pay for a car from pre-tax salary — has become so popular it cost the federal budget an estimated $5.1 billion in forgone revenue, about three times the original forecast. That's a lot of Australians doing the maths and liking what they see.

And on the car sales side? EVs and plug-in hybrids hit 35.8% of new passenger car sales in June 2026, with full BEVs making up one in every four car sales. At the same point last year, EVs were just 11% of new vehicle sales. The shift is extraordinary. Many of those cars are going through novated leases.

So far so good. Here's where it gets complicated.

The number most people skip: the residual value

Every novated lease has a residual value — the amount your finance provider says the car will be worth at the end of the lease term. The ATO sets minimum residuals. For a five-year term, that minimum is 28.13% of the original vehicle cost. On a $65,000 EV, that's a residual of roughly $18,300. At the end of your lease, you either pay that amount to own the car, refinance it, or hand the car back and hope it sells for at least that much.

The problem? The market doesn't always cooperate with what the ATO says the car should be worth.

How fast are EVs actually depreciating in Australia?

Faster than petrol cars — significantly faster. According to AADA and AutoGrab data, a one-year-old EV in Australia loses an average of 25% of its value, compared to 11.5% for petrol vehicles and just 1.7% for hybrids over the same period. Over three years, the average EV retains 60.3% of its value, compared to 92.4% for hybrids at the same point.

But it's not just the average that matters — it's the spread. The BYD Seal was holding around 78% of its value after two years, while the MG4 was down at 50%. Used Tesla Model Y prices fell 36% over two years, and the BYD Atto 3 dropped 29%. Much of that damage came not from the cars wearing out, but from manufacturers cutting new-car prices — which instantly repriced every used example on the market overnight.

That's a risk that simply didn't exist with petrol cars. When Toyota dropped the price of a new Corolla by $3,000, it didn't crater the resale value of every three-year-old Corolla in the country. When Tesla cuts new prices — which it has done repeatedly — it does exactly that to used Teslas.

What happens when the market value falls below your residual?

You pay the difference. That's it. ATO rules set minimum residuals, and if the market value at lease end is lower, you're liable for the gap — or you refinance it. This isn't a theoretical risk. Australian data shows the risk is not theoretical at all. CarsGuide research found the average used Tesla Model 3 listing price fell from $65,990 in January 2023 to $46,705 in December 2024 — a 30% drop in just two years.

Run the numbers on a three-year novated lease at 46.88% residual (the ATO minimum at three years): on a $65,000 EV that's a $30,472 residual. If the market only offers $46,000 for that car, you're $4,472 short before you even factor in your options. On a pricier model, that gap gets uglier fast.

The FBT rule change makes the timing more urgent

Here's the other wrinkle. The full FBT exemption — the thing that makes novated lease EVs so attractive in the first place — is being wound back. The Australian Government confirmed phased changes to the FBT exemption on 5 May 2026. The full exemption continues until 31 March 2027. From 1 April 2027, the full exemption only applies to EVs valued at $75,000 or less. EVs above $75,000 but below the fuel-efficient luxury car tax threshold will receive only a 25% discount on FBT. From 1 April 2029, the full exemption is replaced by a 25% FBT discount for all eligible EVs.

The saving grace: existing leases are grandfathered under the rules that applied when you signed, for the full term of that lease. If you lock in a novated lease before 31 March 2027, you generally keep the full exemption for the entire lease term — even after the rules change. But that deadline is less than eight months away, and it only applies to full BEVs. PHEVs have been excluded from the exemption since April 2025.

A coming supply wave that could push used EV prices lower

One more thing to factor in: the used EV market is about to get a lot bigger. Around 157,000 EVs were sold in Australia in 2025, and a large share went through novated leases on three-year terms. The FBT off-lease supply wave is actively building and will continue to exert downward pressure on used EV prices through 2026 and 2027. More supply means more competition for buyers of used EVs — which is great if you're buying one, and potentially painful if you're trying to sell one at the end of a lease.

So should you avoid novated leases entirely?

No. The FBT savings are genuinely powerful — for most salary earners, they're still larger than the residual risk. Novated leasing gaining momentum as a channel for EV adoption has real financial logic behind it, and locking in before 31 March 2027 still makes a lot of sense for many people. But the residual deserves as much scrutiny as the weekly payment. Most Australians don't give it any.

Here's what to actually check before you sign:

• Compare the ATO minimum residual against realistic resale projections for that specific model. Look at what three-to-five-year-old examples of the same car are selling for today and project forward — don't just trust the finance quote.
• Check the model's price-cut history. Brands that have repeatedly cut new-car prices are a higher residual risk. Brands that have held their new-car pricing tend to hold used-car values better too.
• Choose the lease term carefully. A longer term gives the car more time to depreciate past the residual, lowering your risk of finishing underwater. The ATO minimum residual at five years (28.13%) is significantly lower than at three years (46.88%).
• Check you're under the FBT cap. The full exemption only applies to BEVs priced below the luxury car tax threshold for fuel-efficient vehicles — $91,387 for 2026–27. Above that, no exemption applies at all.
• Factor in the Reportable Fringe Benefits Amount (RFBA). Even with zero FBT payable, an RFBA still needs to be reported, which can affect HECS repayments, Medicare Levy Surcharge assessments, and government benefits. Most novated lease brochures don't lead with this.

Where Milam fits in

Milam is built around a different idea: what if you could get lower weekly payments and actually walk away with money at the end — not a residual liability? With a Milam GFV arrangement, the Guaranteed Future Value is set at the start, your weekly payment is lower because you're not paying off the whole car, and when you return the vehicle you receive an equity payout if the car sells for more than the GFV. You don't carry the downside residual risk alone.

That's not how a standard novated lease works. In a standard novated lease, if the market value is below the residual at lease end, the gap is your problem. With Milam, the structure is designed so you benefit from the upside, not just absorb the downside.

As always, everyone's financial situation is different. Speak to a financial adviser before making any decisions about novated leases, GFV loans, or car finance structures. The right answer depends on your income, tax situation, employer, and how long you plan to keep the car.