Finance Lease

Flexible Financing for Vehicles, Equipment & Business Growth in Australia

Finance lease is a popular financing option for Australian businesses and self-employed individuals looking to use vehicles, equipment, or other assets without the burden of ownership. Under a finance lease, the financier owns the asset, and you lease it for a fixed term, making regular payments. At the end of the term, you can return the asset, purchase it at a residual value, or extend the lease. This allows businesses to preserve cash flow, access tax benefits, and use critical assets to drive growth.

• Finance for cars, trucks, utes, vans, and commercial vehicles
• Equipment financing for machinery, medical tools, and technology
• Low doc and full doc finance lease options
• Flexible lease terms up to 7 years
• Residual value options to manage end-of-term costs
• Suitable for new businesses and ABNs under 2 years
• Fast approvals with minimal paperwork

What is Finance Lease?

In a finance lease agreement, the financier purchases the asset and leases it to you for an agreed term, typically 1 to 7 years. You make regular payments to use the asset, which remains owned by the financier. At the end of the lease, you can choose to return the asset, purchase it at a pre-agreed residual value, or extend the lease. This structure allows businesses to use assets without taking on ownership liabilities while potentially claiming tax deductions on lease payments, depending on your circumstances.

Types of Vehicles and Equipment Financed

Finance lease is versatile and can be used to access a wide range of movable assets critical to Australian businesses. Examples include:

• Cars, utes, vans, trucks, trailers, buses, and forklifts for industries like transport, construction, and logistics
• Heavy machinery such as excavators, bulldozers, cranes, and agricultural equipment like tractors and harvesters
• Medical equipment including diagnostic machines, dental chairs, and imaging equipment for healthcare providers
• Technology and office equipment like computers, servers, printers, and point-of-sale systems
• Manufacturing tools such as CNC machines, lathes, and other production equipment

Tax Advantages of Finance Lease

Finance leases offer several potential tax benefits for Australian businesses, but eligibility depends on your business structure and the advice of your accountant. Key advantages include:

• Lease payment deductions: Lease payments may be fully tax-deductible as a business expense, simplifying tax claims
• GST benefits: If the asset is GST-eligible, the GST component of lease payments can often be claimed through your Business Activity Statement (BAS)
• No depreciation: As you don’t own the asset, you avoid depreciation calculations, which can simplify accounting
• Flexibility: Suitable for businesses that prefer not to own assets, reducing balance sheet liabilities

Example: A logistics company leases a $70,000 delivery van via a finance lease. They deduct the full lease payments annually as a business expense and claim the GST component via their BAS, improving cash flow without the need to manage depreciation.

Disadvantages of Finance Lease

While finance leases offer many benefits, there are some potential drawbacks to consider:

• No ownership: You don’t own the asset unless you choose to purchase it at the residual value, which may increase costs
• Higher total cost: Total lease payments may exceed the asset’s value compared to paying cash upfront
• Repossession risk: If you default on payments, the financier can repossess the asset, impacting business operations
• Fixed commitment: You’re locked into payments for the lease term, which could strain cash flow if business conditions change

Example: A dental practice leases a $30,000 imaging machine but faces a slow period. If they miss payments, the financier could repossess the machine, disrupting patient services.

Why Choose Finance Lease?

Finance lease is ideal for Australian businesses seeking to use assets without the responsibilities of ownership. It’s particularly suitable for:

• Self-employed individuals and sole traders needing vehicles or equipment
• Small to medium businesses looking to access assets without large upfront costs
• Industries like construction, transport, healthcare, and agriculture requiring specialised equipment

How Finance Lease Works: An Example

Let’s say a construction business in Melbourne wants to lease a $50,000 excavator. They opt for a 5-year finance lease with a 10% residual value ($5,000) and an interest rate of 6%. The financier owns the excavator, and the business makes monthly payments of approximately $760 (excluding GST). They claim the lease payments and GST via their BAS, and at the end of the term, they can purchase the excavator for $5,000, return it, or extend the lease.

Key Considerations for Australian Businesses

• ABN requirements: Most financiers require an active ABN, but low doc options are available for newer businesses
• Credit history: A good credit score can secure better lease terms, but options exist for those with less-than-perfect credit
• Residual value: The residual value at the end of the lease can impact your decision to purchase or return the asset
• Consult your accountant: Tax benefits vary based on your business structure (e.g., sole trader, company) and the asset’s use

Ready to Get Started?

Finance lease offers a flexible, tax-effective way to use vehicles and equipment for your Australian business without the burdens of ownership. Whether you’re a tradie needing a new ute or a medical practice leasing diagnostic tools, a finance lease can help you grow while maintaining cash flow. Contact us today to explore your options!