From April next year, electric vehicles will attract a lower fringe-benefit tax rate than petrol or diesel cars. Advocates say the change will push more EVs into business fleets, improving second-hand supply for everyday buyers within 3-5 years.
A small tax change in Budget 2026 could eventually make electric vehicles more affordable for ordinary New Zealanders — even if they never buy a new car themselves.
The Government has altered fringe-benefit tax (FBT) rates for motor vehicles. From April next year, electric vehicles will attract a rate of 17 percent, down from the existing flat 20 percent across all vehicle types. Hybrids will sit at 19.6 percent, while petrol and diesel cars shift to 22.8 percent, according to RNZ's coverage of the change.
Drive Electric chair Kirsten Corson said the change removes any tax advantage that petrol and diesel vehicles previously held. "That's significant, when you look at it from a total cost-of-business perspective, which is how fleet managers look at it," she said.
The practical impact works like this: a $60,000 electric vehicle subject to fringe-benefit tax would cost $1,800 less per year under the new rate than it would have under the old 20 percent rate. An equivalent petrol car would cost $1,680 more per year. For businesses comparing the total cost of their fleet, that shifts the calculus in favour of electric.
Why it matters for second-hand buyers
Businesses purchase 60-70 percent of new cars in New Zealand every year, so the change will have an immediate effect on the composition of the fleet. As businesses turn over their vehicles over the typical 3-5 year cycle, more electric vehicles will flow into the second-hand market — improving both availability and affordability for private buyers.
"The thing that often gets said is average Kiwis saying, 'We'd love to get an EV, but we can't afford one'," Corson said. "We do expect to see a lot more EVs flowing into the business fleets, which is what we need to create that second and third-hand market to make EVs affordable for everyone."
The FBT change follows a clarification by Inland Revenue last year of a perceived loophole that many believed automatically exempted utes — removing another factor that had previously pushed fleet buyers toward diesel utes.
Transport accounts for about 18 percent of New Zealand's total greenhouse gas emissions. The Government's own emissions reduction plan relies partly on accelerating the EV fleet — and the Budget's FBT change is a demand-side lever designed to do exactly that.
For workers, Drive Electric is also pushing for a salary sacrifice scheme — similar to one operating in Australia — where employees could use pre-tax income to lease an EV, also exempt from fringe-benefit tax. That would further widen access, particularly for middle and lower-income earners who currently cannot afford the upfront purchase price of an electric vehicle. Electric vehicle insurance premiums already tend to run higher than equivalent petrol cars, reflecting the higher repair and parts costs associated with newer EV technology — another cost consideration for buyers weighing the switch.
This article is for general information only and is not personalised financial advice. Seek advice from a licensed financial adviser (registered on the FSPR) for guidance specific to your situation.