What is a Finance Lease?
A finance lease is a form of car finance for business owners that allows a customer the use of a commercial vehicle or car while enjoying all the benefits of ownership while the lender owns the car until you finish your lease term and make the necessary residual payment.
How does a Finance Lease work?
When you decide to lease, your finance provider will buy the car and then allow you the use of it once you pay a deposit (if necessary) and the agreed upon monthly payments.
A Finance Lease is also known as an Asset Lease, Vehicle Lease, or Car Lease.
With one of these products you are not obligated to buying the car at the end of the term which is a benefit that suits business owners who are uncertain about the direction of their company. For example, you might lease a Ute but realise that you business is better suited to a van. Once the term is up, you can simply return your car to the lender and walk away
What are the advantages of a Finance Lease?
There are a number of reasons why finance leasing is a great option.
You can choose your term
Lease terms range from 12 to 60 months which gives sole traders and business owners more flexibility to choose a term that suits their business objectives.
You can include all your costs up front
You can incorporate running costs and servicing into your monthly repayments. Your interest rate is fixed for the term of the lease so you will benefit from equal monthly repayments, making it easier to budget for your vehicle costs.
You get all the new car benefits
All new cars are covered by the manufacturers statutory warranty so you have the peace of mind that any unexpected costs are covered.
You can pay in advance
Sometimes accounts recommend paying a advance payments for taxable deduction purposes or if they have cash at hand. This is another advantage that can provide flexibility and better management of your budget.
Some people like to make their lease payments in advance for tax deduction purposes or if they have the cash on hand at that time. With a finance lease, this isn’t a problem at all, and it’s a benefit that many business owners like to take advantage of as it offers them some flexibility with their budgets.
You can save money.
You can save on a finance lease in a number of ways.
Firstly, the lender is entitled to claim back the GST from the purchase price. This means that your monthly repayments are calculated on the pre GST price of your new car purchase.
If you decide to return the car you do not need to pay the residual which basically means that you re paying less for the use of the car.
You can claim GST paid as an input credit
Now while the GST is taken off the price of the car in order to calculate your payments, you still have to pay it at some point. The monthly lease rental and the residual payment will have GST charged on them but (and it’s a pretty big ‘but’) if you are registered for GST then you can claim some or even all of the GST that’s in your lease as an input credit your next Business Activity Statement. And what does that mean? It means more money in your pocket of course. These last two are definitely our favourite benefits.
What's the Yellow Line?
A finance lease is best suited to people that run their own business or companies that use the vehicle primarily for business-related purposes.
If you’re an employee, you can still opt for a form of car leasing called the novated lease. This is where your vehicle comes as part of your remuneration package from your employer and your payments are deducted from your salary. It’s a little different to regular car leasing in that you, not the financier, own the car.
Behind buying a new home, a new car is likely to be the next largest financial decision you will make. There are a vast range of products and banks are extremely competitive. It is best to seek professional financial advise to ensure you obtain the most appropriate home loan product for your needs.
Yellow loans has a vast range of lenders with a range of products to achieve the best results on obtaining the best car loan deals for you. You can contact us here and we can get your future looking bright.
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