iscover 
Around 130,000 Australians made the switch to electric and hybrid vehicles in 2025, amounting to $7.37 billion of vehicle financing, according to new Australian Finance Industry Association (AFIA) industry data.
AFIA’s latest Electric Vehicle (EV) & Hybrid Finance Report shows EVs and hybrids are taking a growing share of Australia’s financed vehicle market, although the transport sector still accounts for 22 per cent of national emissions.
Part of this growth has been driven by the fringe benefits tax (FBT) exemption, known as the Electric Car Discount, which allows salaried employees to take out a novated lease on an electric vehicle and pay for it entirely from their pre-tax income without incurring FBT.
However, from 1 April 2025, plug-in hybrid electric vehicles no longer qualify for the exemption, while the FBT exemption for battery electric vehicles is set to remain in place until at least mid-2027.
AFIA CEO Diane Tate said the data shows government incentives are playing a critical role in driving demand.
“The data tells a clear story: government incentives are working. Nearly 130,000 vehicles and $7.37 billion in finance in a single year shows this has been an incredibly effective policy in helping Australians make the switch to vehicles that are cleaner and cheaper to run,” Tate said.
However, AFIA warned that changes to tax settings are already having a measurable impact on finance activity.
The removal of the FBT exemption for plug-in hybrids in March 2025 triggered a decline in demand, with hybrid financing in the novated leasing channel falling by around 70 per cent in April compared to March, before remaining low and relatively flat for the rest of the year.
“The removal of the FBT exemption for hybrid vehicles was a natural experiment we didn’t ask for. The market responded immediately and negatively, showing how sensitive consumers and businesses are to policy change. Policymakers should take that as a warning, not a template,” Tate said.
New AFIA-commissioned research from Pyxis Polling and Insights further highlights the role of incentives in shaping borrowing and purchasing behaviour.
The polling found that while 39 per cent of Australians are likely to choose an electric or hybrid vehicle for their next purchase, 46 per cent still expect to buy an internal combustion engine vehicle.
More than one in three Australians (37 per cent) said they would be less likely to purchase an EV if the FBT exemption was removed.
For brokers and lenders, the data reinforces the importance of policy certainty in sustaining demand across asset finance and novated leasing channels.
Tate noted the finance industry is already deploying billions of dollars into EV and hybrid lending each year, supporting the transition to lower-emission vehicles.
However, she warned that inconsistent or uncertain policy settings risk undermining that momentum.
“What we need from the Government is certainty – without national, consistent, long-term policy, we risk stalling just as momentum is building and starting to make a difference,” she said.
[Related: Savvy-backed finance platform Drivemore launches]