A surge in demand for electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs), driven by the federal government's fringe benefits tax (FBT) exemption for zero- or low-emission vehicles, has led to a sharp increase in novated lease referrals, according to major aggregator LMG.

The group reports a 65% year-on-year rise in novated lease referrals, with a growing number of LMG brokers directing these internally through its new asset finance marketplace, Asset Finance Exchange (AFX).

Commenting on the increase, Jordan Mutton, General Manager of AFX, stated:

"The introduction of the FBT exemption has enabled more Australians to consider EVs and PHEVs, and brokers are now well-positioned to assist clients in taking advantage of these savings."

Simon Southwell, CEO of Positive Salary Packaging, noted:

"The Australian market has seen a broader range of EVs, with more affordable options, such as those from BYD and MG, driving increased demand. While Tesla's popularity declined in 2024, the overall EV market has expanded significantly.

"As the PHEV exemption deadline approaches, demand for plug-in hybrids remains strong, and EV sales are expected to increase in the latter half of 2025, supported by the ongoing FBT exemption for zero-emission vehicles."

Similarly, Mutton stated that EVs and novated leasing would continue to attract consumers, noting that more than 40 new EV models are expected to enter the Australian market by the end of 2025.

LMG reports that an increasing number of brokers are referring novated leasing business through AFX, enabling them to expand their services and grow their businesses without adding complexity.

The rising popularity of electric and hybrid vehicles has led more lenders and financial institutions to enhance their novated leasing and asset finance offerings over the past year.

In September, CBA released small-business data showing a 553% increase in demand for hybrid vehicles during the financial year ending June 2024, while finance for electric vehicles rose by 254%.

More lenders have also entered the car finance sector, with Resimac Group Ltd (Resimac) agreeing in October to acquire Westpac Banking Corporation's portfolio of auto loan receivables and leases in a transaction valued at up to AUD 1.6 billion (US$ 1 billion).

Meanwhile, non-bank lenders such as Pepper Money, MONEYME, and Metro have introduced tailored options to meet the growing demand for sustainable asset finance products.