LE Through our own employee base and in talking to other organisations, we have found considerable interest in EVs – especially with the fringe benefits tax (FBT) exemption. But employees are hesitant to try a new technology, especially if they haven’t fully considered all the requirements and implications.

At the end of last year, we launched a fully flexible, month-to-month subscription package, with the added benefit of salary packaging to make use of the FBT exemption. It has been very popular because it is a ‘try before you buy’ model for people who are not sure if owning an EV will work for their lifestyle. They can return it with 30 days’ notice and no cancellation fee.

We have seen significant uptake in the EV subscription offer within the Origin Energy employee base as well as strong interest from employees of other organisations that are offering the programme. A lot of the employees who have taken an EV with Origin would not have taken the first step without the flexibility the subscription provides.

LE The majority have kept them. One of the disadvantages of a novated lease is that you are locked in for 4-5 years. If you leave your existing employer, you cannot transfer the novated lease – you must pay for it with your post-tax salary. However, with the subscription option, if an employee leaves they can simply hand the vehicle back.

DI GORI As I mentioned earlier, almost half of all the leases in our novated business in recent months are EVs and we haven’t had feedback from clients about the challenges Chau alludes to.

Novated finance has been a popular product among government employees and some of the largest corporates in Australia for many years, and recently announced government changes to the FBT regime supporting EV uptake has further enhanced product penetration. This is positive as it is a valuable and unique product offering in the Australian financial services market.

It is worth noting, though, that our larger customers are professional services employees and their demand, for the time being, is largely for Tesla vehicles. This is purely because of the supply-side constraints we have all spoken about already.

It is also worth noting that the people who generally opt for a novated lease are above-average income earners. Higher-income earners are always going to be early adopters of newer technology but, for real transition to occur, more manufacturers need to come to the table. Whether the meaningful uptake of EVs in the novated financing space is enough to drive a supply response is the real question.

The infrastructure debate adds an unnecessary layer of noise and confusion. However, we tend to find that most individuals are open to working through the issues when the car has arrived, by which point the financial benefits have started to come through and the perceived barrier to entry disappears.

LIANG BYD is hitting this sweet spot in price for customers and is very popular in Europe. Our experience with novated leasing is the same. Across the board, the novated book has exploded.

DI GORI We hear many anecdotes that employees that had not considered an EV at this point in the cycle are now buying one. Some customers ordering a BYD, for example, will take the one that is in stock. We do not see this response to a typical ICE [internal combustion engine] vehicle, where customers are willing to wait 6-12 months for a specific vehicle tailored to their exact specification requirements.

TRAN I had the same experience with independent lenders and OEMs [original equipment manufacturers]. The speed between the outright purchase has improved dramatically for traditional loans and novated leases.

OEMs focus heavily on the customer experience. Their main concerns are with the way the novated lease market is structured and, with only one or two preferred financing partners, the fact that costs can be high. An improvement in the novated lease product could help accelerate choice whereby employees can seek their own finance and bring it on board through the same providers. This will optimise cost over benefit for users.

MILSOM Rental is useful as a try-before-you-buy option. There are also notable use cases for rental schemes, for example with ride-sharing drivers. However, these are likely to always play a smaller part of the overall market, as we believe Australians generally prefer to own their vehicles.

The rise in popularity of the novated lease is a direct result of generous government subsidies. The opportunity for higher income earners to save thousands of dollars in tax is a very clear incentive. Our concern is that novated leasing is not a level playing field. There is a narrow field of providers and consumers are not always offered the same protections, such as responsible lending checks, as they would with regulated loans. We also worry that some of the incentive value is absorbed by elements of the supply chain, including salary packagers, and that consumers are not always aware of this.

If we ask about the experience of taking on a novated lease, many will say they struggled to calculate the effective cost of the arrangement. I think we would all agree that this is not a satisfactory state of affairs.

Novated leasing has driven uptake. However, we think it is time to consider opening incentives to other types of finance to drive competition, improve transparency in lending and increase access to consumers who are not able to access salary packaging – for example, employees of SMEs or the self-employed.