What is Finance Lease?

What is an operating lease?

An operating lease is a simple, cost-effective way to finance your company’s vehicles. Essentially a long-term rental agreement, operating leases are tax-deductible and allow you to always keep your fleet current.

How does an operating lease work?

An operating lease is similar to a rental agreement. Under the terms of an operating lease, Auto Car Finance owns the vehicle but allows you to use it exclusively for a period of between one and five years. You’ll make regular repayments throughout this lease term, but there’s no initial deposit required, and you’ll return the vehicle to us at the end of your lease with no more to pay.

An Auto Car Finance operating lease allows you to free up working capital by leasing rather than owning the asset. You also avoid residual value risk (also known as resale value risk) because the asset is returned to us at the end of your lease term. Our operating leases allow you to pay for most of your vehicle running costs in one monthly payment, making it easier to manage your cash flow and budget.

Operating lease benefits

With an Auto Car Finance operating lease, you can use your working capital to fund the growth of your business, rather than your fleet.

• Tax-deductible
  Leasing repayments (excluding the GST portion) are usually tax-deductible when the vehicle is used for business purposes. You can claim the GST components of your repayments when you lodge your business activity statements (BAS).
• No residual value risk
  With an operating lease, Auto Car Finance is responsible for the resale or disposal of your vehicle – you simply return the car to us at the end of the lease term and decide whether you’d like to upgrade to the latest model.
• One easy monthly payment
  Managing your cash flow and budget is easy with one fixed monthly payment covering most of your vehicles running costs. If you run a larger fleet, you’ll find operating lease a particularly convenient way to manage the expenses associated with your business vehicles.
  
• Minimal administration
  Because your operating lease covers most of your vehicle’s running and maintenance costs (including servicing, insurance, tyres and roadside assistance), there’s less administration and paperwork for you. Auto Car Finance can also supply and manage fuel cards and include these charges along with road tolls and ETAG expenses on your monthly invoice.

Contact Auto Car Finance today for more information about using an operating lease to free up your working capital. 

How does a finance lease work?

With a finance lease, your finance provider owns the asset throughout the lease term, but you benefit from its use.

One key feature of a finance lease is that you’re not committed to buying the asset at the end of the finance term – but you can if you want to.

Finance lease benefits

With an Auto Car Finance finance lease, you get the benefits of an asset without paying for it upfront – and you can choose to replace the asset or simply hand it back to your finance provider at the end of the lease term.

What is a chattel mortgage?

A chattel mortgage is a type of commercial car loan.

Intended for vehicles that are used for business purposes at least 50% of the time, chattel mortgages are popular with business owners as a way to own a vehicle outright while enjoying a range of tax benefits.

With a chattel mortgage, you own the vehicle from the time of purchase with your lender taking a mortgage over the vehicle as security for the loan. You’ll make regular payments to pay back the mortgage; once these are complete, the mortgage is removed, and the vehicle’s title will pass to you.

How does a chattel mortgage work?

Chattel mortgages have a similar structure to traditional secured car loans, but allow you to claim tax benefits including GST, interest charges and depreciation. Unlike other types of commercial car loans, with a chattel mortgage, you have ownership of the asset once it’s purchased and can use the income it produces to pay off the loan. The vehicle can also be treated as an asset on your balance sheet.

Business owners can finance up to 100% of the value of their new vehicle with a chattel mortgage, allowing you to save your working capital to fund growth. However, because your vehicle is held as security, your lender may be able to repossess it if you fall behind in your repayments.

Chattel mortgage benefits

With an Auto Car Finance chattel mortgage, you can use your working capital to fund the growth of your business, rather than your vehicles.

What is a Sale and lease back?

A car loan is a type of personal loan that lets you pay for your car in monthly installments rather than upfront. You’ll take ownership of the vehicle at the time of purchase and will own it outright once your contract is complete.

Car loans are generally categorised into new car loans and used car loans and may be secured or unsecured.

What is an operating lease?

An operating lease is a simple, cost-effective way to finance your company’s vehicles. Essentially a long-term rental agreement, operating leases are tax-deductible and allow you to always keep your fleet current.

What is an operating lease?

An operating lease is a simple, cost-effective way to finance your company’s vehicles. Essentially a long-term rental agreement, operating leases are tax-deductible and allow you to always keep your fleet current.

How does an operating lease work?

An operating lease is similar to a rental agreement. Under the terms of an operating lease, Auto Car Finance owns the vehicle but allows you to use it exclusively for a period of between one and five years. You’ll make regular repayments throughout this lease term, but there’s no initial deposit required, and you’ll return the vehicle to us at the end of your lease with no more to pay.

An Auto Car Finance operating lease allows you to free up working capital by leasing rather than owning the asset. You also avoid residual value risk (also known as resale value risk) because the asset is returned to us at the end of your lease term. Our operating leases allow you to pay for most of your vehicle running costs in one monthly payment, making it easier to manage your cash flow and budget.

What is the residual value of a car?

At the end of your novated lease, you’ll have a residual value payment due. The residual value is the GST-inclusive amount owing on your car at this time.

The residual value is calculated by the Australian Taxation Office (ATO) and is usually expressed as a percentage of the amount financed:

* Please treat these values as guidelines only

We’ll be in touch six months before your lease term ends to discuss your residual value and the options you have, which might include:

• Signing a novated lease for a new car
• Refinancing your residual value for another loan term
• Paying out your residual value so that you own your car outright

How is the residual value agreed for a finance lease?

Your residual value will be set in line with ATO (Australian Tax Office) guidelines and is usually expressed as a percentage of the amount financed.

When you enter into a finance lease, you accept the risk that the lender may achieve a sale price below the agreed residual value if you return the asset to them at the end of the lease term. In this scenario, you would be responsible for financing the shortfall between the agreed residual value and the current market value of the vehicle.

Contact Auto Car Finance today for more information about how a finance lease can keep you in the latest model and deliver compelling tax benefits.