How Does A Finance Lease Work?
In short, a finance lease is a situation wherein a lender will purchase an asset on your company’s behalf, whilst they allow you to use it in exchange for a series of regular payments, which are tax deductible so long as the equipment is used for earning assessable income. The lender in this situation is referred to as the ‘leaser’ and you as the ‘lessee’.
The formal agreement surrounding it will specify the terms of the lease including:
- The residual value of the asset
- Finance lease period
- Monthly lease payments
- Depreciation rates for tax purposes
What Happens When The Finance Lease Expires?
There are some different alternatives available to you:
- You can opt to refinance the residual value of the finance lease
- The finance lease contract can be paid out in full
- You can make an offer to purchase the asset.
Who Can Benefit From A Finance Lease?
A finance lease is an ideal finance option for businesses that wish to purchase a vehicle, equipment or similar assets.
Finance Lease Key Features
- The period of the finance lease is flexible and we offer up to contract terms of up to 60 months
- The finance lease agreement outlines the residual value, which has been determined by the schedule handed down from the Commissioner of Taxation
- You get to use the asset immediately without any capital outlay, which frees up cash flow for your business.
- The lease is tax deductible
- The repayment schedule is very flexible with options for:
Benefits of The Finance Lease
- Helps to maintain liquidity while still enjoying the benefits of the asset, with no deposit required for a finance lease.
- The residual values and rental agreement terms are negotiable to accommodate your circumstances
- We offer a finance lease for up to 60 months
- Tax deductibility can be utilised to cut costs
Finance Lease Interest Rates
- Interest rate is fixed throughout the term of the loan.Check out our Comparison Table of Loan Products to assess your individual circumstances, right here on our website.
Finance Lease Fees and Charges
The fees and charges for the lease are now upfront, as listed below
- There is an establishment fee which includes GST
- There is a cashbook keeping fee which includes GST
Unfortunately, the fees and charges need to be paid upfront as they can’t be rolled into the lease, and thus will need to be paid when the lease is signed. Other fees may apply, and monthly finance rental payments may include GST. Speak to an expert at Natloans today to determine your specific circumstances.