How does a finance lease work?
Preserve cash flow, know your costs upfront and reap tax benefits. All this while you enjoy immediate use of your financed asset. A finance lease has several key advantages for your business. Here is how it works.
- Your lender purchases the asset on your behalf
- You lease the asset from your lender through regular tax deductible* payments
*Providing the equipment is used solely for earning assessable income
So your desired asset is yours to use and leverage for the finance lease period. The lender has the right to sell the equipment if they wish. Generally, however, in this circumstance you can purchase the equipment for the agreed value, this known as the residual value. The residual value is stipulated in the finance lease agreement.
The finance lease agreement explained
In a finance lease agreement, your lender is know as the leaser and you are know as the lessee. This formal agreement specifies the terms of your 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
- The repayment schedule is very flexible with options for:
- You get to use the asset immediately without any capital outlay, which frees up cash flow for your business.
- The lease is tax deductible
Finance lease benefits
- You can free up your cash flow while still enjoying the benefits of the asset. Because there is 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
- You can utilise the tax benefits to reduce your tax bill
Finance lease interest rates
- Interest rate is fixed throughout the term of the loan
Click here to review our Comparison Table of Loan Products
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
N.B. The fees and charges need to be paid upfront as they can’t be rolled into the lease. These will need to be paid when the lease is signed. The monthly finance rental payments may attract GST. Other fees may apply too. Speak to GT Capital Group LLC to determine your specific circumstances.