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Finance

A Finance Lease can also be known as an Asset Lease or Vehicle Lease

What is Car Lease?

A Car Lease or Finance Lease is a commercial finance product which enables the customer to have the use of a car or commercial vehicle and the benefits of ownership, while the financier retains actual ownership of the vehicle.

Please note: If you are looking for information on a range of car finance options, please select: business car finance or personal car finance. ‘Car Lease’ or ‘Finance Lease’ is the name of a specific type of commercial car finance product.

A Finance Lease can also be known as an Asset Lease or Vehicle Lease.

The financier purchases the vehicle on behalf of the customer, who then leases the vehicle back from the financier and pays a fixed monthly lease rental for the term of the lease. At the end of the lease the customer can either pay a residual value (final installment) on the lease and take ownership of the car, trade it in, or re-finance the residual and continue the lease.
  • Flexible contract terms ranging from 12 to 60 months (one to five years)
  • Fixed interest rate
  • Fixed monthly lease rentals
  • Costs are known in advance
  • A residual can be applied to a lease, lowering monthly payments
  • Tax deductions are available when the vehicle is used for business purposes
  • As the GST contained in the car’s purchase price is claimed back by the financier, only the vehicle’s price exclusive of GST is financed, which in turn lowers monthly payments
  • Ability to make advance lease payments for tax deduction or cash-flow purposes
  • The lease is secured against the vehicle, allowing lower interest rates
  • The finance is secured against the vehicle, allowing lower interest rates
Car Leasing is suitable for companies, partnerships, sole traders and individuals where the leased vehicle is used for income producing purposes. It is also ideal for employees who want to salary package a vehicle through a Novated Lease as part of their remuneration.
GST is charged on the monthly lease rental and on the residual value at the end of the lease. Where the customer is registered for GST, they can claim some or all of the GST contained in the lease rental, and the residual value as an input credit on their next Business Activity Statement (BAS). Where the amount financed is below the Depreciation Limit the customer claims the lease rental as a tax deduction. Where the amount financed is above the Depreciation Limit, interest charges on the lease and depreciation up to the value of the Depreciation Limit can be claimed.
GST is charged on the monthly lease rental and on the residual value at the end of the lease. Where the customer is registered for GST, they can claim some or all of the GST contained in the lease rental, and the residual value as an input credit on their next Business Activity Statement (BAS). Where the amount financed is below the Depreciation Limit the customer claims the lease rental as a tax deduction. Where the amount financed is above the Depreciation Limit, interest charges on the lease and depreciation up to the value of the Depreciation Limit can be claimed.
  • Flexible contract terms ranging from 12 to 60 months (one to five years)
  • Fixed interest rate
  • Fixed monthly lease rentals
  • Costs are known in advance
  • A residual can be applied to a lease, lowering monthly payments
  • Tax deductions are available when the vehicle is used for business purposes
  • As the GST contained in the car’s purchase price is claimed back by the financier, only the vehicle’s price exclusive of GST is financed, which in turn lowers monthly payments
  • Ability to make advance lease payments for tax deduction or cash-flow purposes
  • The lease is secured against the vehicle, allowing lower interest rates
  • The finance is secured against the vehicle, allowing lower interest rates
A Commercial Hire Purchase (CHP) may be suitable for businesses (including companies, partnerships and sole traders) who account for GST on either an Accruals or Cash basis. Prior to 1 July 2012, CHP were commonly used by individuals receiving a car allowance who used their vehicle predominantly for business purposes. However, due to changes to the GST treatment of CHP that came into effect on 1 July 2012 a CHP is now significantly less attractive. As such, employees with a car allowance may wish to consider other finance options (below).
Under a Commercial Hire Purchase agreement, GST is payable on the purchase price of the vehicle and also on all term charges and any fees. These GST charges are payable upon settlement of the contract, and can either be added to the loan or paid up-front. Businesses using either the Cash or Accruals accounting method (and registered for GST) can claim the GST paid on the purchase price of the vehicle up-front when they lodge their next BAS. Additionally, the GST charged on the interest (term charges) and any fees can be claimed back as Input Tax Credit progressively over the life of the loan. Where the vehicle is used for business purposes, the hirer can claim depreciation up to the Depreciation Limit and interest charges on the contract as a tax deduction.

Commercial Hire Purchase (CHP)

A Commercial Hire Purchase (CHP) is a commercial finance product where the customer hires the vehicle from the financier for a fixed monthly repayment over a set period of time. Commercial Hire Purchase can also be known as a Corporate Hire Purchase, Hire Purchase or Offer To Hire, and is often abbreviated as CHP or HP.
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