The balloon payment isn't optional.
At the end of your lease the residual falls due, whether you've planned for it or not. The ATO sets the minimum, your term sets the percentage, and this Bucket builds toward it from month one.
A single payment, years out, that you cannot negotiate down.
Every other Bucket on this site deals with money moving within a year — a bill next quarter, a fund you might dip into. The residual is different. It's a single, regulated payment due years from now, and there's no drawing it down early or negotiating the amount later.
The percentage isn't set by your lease provider. Under ATO rules it's a minimum share of the vehicle's cost determined by the lease term: shorter leases carry a higher residual because the car is assumed to have depreciated less. Your provider can set it higher, but not lower.
Saving for it inside your offset means the money works against your mortgage for the entire multi-year runway, right up until the day you need it. Over a five-year term that's a long time for a substantial balance to be earning its keep.
Lease residual Bucket calculator
| Year | Total savings for the year | Balance at year end | Interest saved that year |
|---|---|---|---|
| Year 1 | $7,813 | $7,813 | $242 |
| Year 2 | $7,813 | $15,627 | $727 |
| Year 3 — residual due | $7,813 | $23,440 | $1,211 |
Residual percentages shown are ATO statutory minimums; your lease agreement may specify a higher figure. Check your contract. This models saving for the residual only, not the lease payments themselves, which are typically deducted from pre-tax salary.
Setting up a lease residual Bucket
Create a Bucket called "Lease residual", set your vehicle price and term, and Savvy Dollar tracks the monthly contribution against your growing balance right up to the payout date on your agreement.
Buckets people pair with this one
Common questions
Where should I save for a novated lease residual?
In your offset account, if you have a mortgage. The residual is a fixed amount due years away, so the balance builds steadily over three to five years. Held in offset it reduces your mortgage interest for that entire period, which is a long runway for a substantial sum.
What is the residual on a novated lease?
A lump sum owed at the end of the lease term, set as a minimum percentage of the vehicle's cost by the ATO. It's 46.88% on a three-year lease and 28.13% on a five-year lease. Your provider may set it higher but not lower.
How do I pay the residual at the end of a novated lease?
You can pay it outright and own the car, refinance it into a new lease or loan, or trade the vehicle in and start a fresh lease. Having the cash saved keeps all three options open — without it, your choices narrow to whatever finance you can arrange.
How much should I save each month for a lease residual?
Divide the residual by the number of months in your term. On a $50,000 vehicle with a three-year lease, the residual is $23,440, which is roughly $651 a month. The calculator above works this out for your own figures.
Is a novated lease worth it?
It depends on your marginal tax rate, how much you drive, and the vehicle. The FBT exemption on eligible electric vehicles has made leases considerably more attractive for some buyers. The residual is the part most people underestimate, which is what this Bucket addresses.
Never mix up the novated lease residual money again
Set it up as its own Bucket in under two minutes.
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