Leasing Finance -
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Leasing Finance

Figuring out the perfect finance product can be confusing and a difficult task. You can discuss this situation with your tax professional, who can help you figure out the best finance product. However, finding out that product can be challenging. At Comfort Retire Investment Services, we can help you simplify the process and find the best offer for you. Our expert consultants can also help you figure out the best deal to meet your requirements. Here is what you need to know about leasing finance and the offers you can choose from.

 

  • Firstly, lease products fall under two categories, i.e., operating lease and finance lease. Almost everything is the same in these two categories except the ownership, residual risk on the vehicle, and disposal.
  • When opting for the type of finance, you need to consider a few things. Enlisted are a few points you should consider;
  • Do you want the ownership of the asset at the end of the lease period?
  • Will you be using the asset for business purposes more often?
  • Do you want to finance just the vehicle or need fleet management services as well?
  • The period you intend to keep the vehicle and the expected travel distance?
  • Will you be showing the asset in the balance sheet of your company?

Finance lease

A finance lease is a form of a rental agreement for the vehicle. You can lease a vehicle or an asset for an agreed period and rental in a finance lease. You and the leasing company set a residual value upfront for the value of the asset at the end of the lease period. This value is recorded in the balance sheet as well.

In most cases, a finance lease does not provide an option to purchase the asset at the end of the term. You will have to return the asset to the leasing company and pay the difference between the market value of the asset and the residual value. Furthermore, you can also trade the asset in on a replacement. However, if you come to an agreement with the leasing company, you can extend the lease period or purchase it.

Operating/Maintained lease

An operating/maintained lease provides a business with the benefits of using a vehicle with no hassle. The finance is not shown in the balance sheet, and you can take care of all costs associated with the vehicle in one monthly payment. As the leasing company takes care of the maintenance and insurance, you can clear all costs, including maintenance, insurance, and finance costs, in one monthly payment.

When you opt for an operating/maintained lease, all you have to do is decide on the lease period and calculate the expected travel distance in a year. The leasing company will calculate the monthly payment based on the lease period and expected travel distance. You will have to give the vehicle back to the leasing company at the end of the term without any additional payments being made.

Commercial hire purchase

Commercial hire purchase is similar to the finance lease, except you get the ownership of the vehicle or asset at the end of the lease period. In this agreement, the leasing company owns the vehicle during the term of the lease/agreement. At the end of the lease term, the ownership automatically transfers to you. Once all agreement terms are completed, the vehicle will become yours.

If you want to purchase a vehicle or asset, you can opt for this finance. Depending on your budget requirements, you can opt for a final settlement payment in the agreement to reduce your monthly payments. Furthermore, you can also opt for an upfront payment or a trade-in as well to reduce your monthly repayments. The finance is disclosed in the balanace sheets of your company.

Chattel mortgage

A chattel mortgage is similar to the commercial hire purchase agreement. However, it comes with some GST benefits. In certain situations, you will be able to claim the entire GST proportion in the BAS period after making the purchase. Everything else in this type of finance product is similar to commercial hire purchase.

Novated lease (salary packaging)

A novated lease(salary packaging) is an agreement between an employer, leasing company, and employee. The agreement is made in the name of the employee who gets the vehicle. In this type of finance, the employer makes the repayments. The agreement between the employee and the employer can be personalised whether the employer deducts the repayments or partial repayments from the employee’s salary or not.

Furthermore, the employer can opt for making payment either during employment or even after the duration of the employment. If the employee leaves the company, they get the option to transfer the lease to the new employer or make the repayments by themselves. However, the difference between the residual value and market value is paid by the employee. The employee can also ask the employer to pay the difference. The finance is not disclosed in the employer’s balance sheets.

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