If a new work vehicle is on the radar it is worth investigating the different vehicle finance options available. The Mortgage and Finance Association of Australia outlines the common vehicle finance options available including car leases, operating car leases, novated leases, hire purchase and chattel mortgage finance.
The Mortgage and Finance Association of Australia outlines the common vehicle finance options available.
If you take out a car lease, the lender agrees to rent the vehicle to you for a set period for an agreed (generally monthly) amount. If the vehicle is entirely for business purposes, the lease payments are completely tax deductible.
Choosing between an operating lease and a finance lease depends on your situation.
With a fully maintained car lease, the ongoing vehicle maintenance charges are included. You can also include tyres and fuel and you pay a higher lease rental.
Under a novated lease, an employee makes an agreement with the Lender for the finance of a vehicle. The employer then takes the repayments out of the employee’s pre-tax salary. If the employee changes jobs, they take the car with them.
Commercial hire purchase is like a car lease in that you pay “rent” over the repayment term. The difference is that you gain equity as you make payments and title passes to you with the last repayment. A commercial hire purchase agreement can be structured with or without a “balloon” payment ie an additional lump sum payment to be made at the end of the lease.
Chattel mortgage finance is a car loan that allows a business using the “cash” method of accounting for the Goods & Services Tax to claim back the GST on the vehicle purchase price in their next Business Activity Statement.
Source: The Essentials of Borrowing – www.essentialsofborrowing.com.au This information may contain references to other special offers or promotions by persons who are not part of the AMP group of companies. This information is provided for convenience and information purposes only. AMP has not verified, and is not responsible for, the information provided by other parties or persons not part of the AMP group of companies. Subject to any applicable law which cannot be excluded, AMP and Invest Blue makes no warranties or representations regarding the quality, accuracy, merchantability or fitness for purpose of the goods or services available from these persons. Your obtaining of goods or services from these persons is at your own risk. You indemnify each member of the AMP group of companies against all liability, loss, damage, cost and expense arising from or relating to your obtaining goods or services from a third party referred to in this website/newsletter.