Car Lease (Finance Lease)
A Car Lease or Finance Lease is a commercial finance product which enables the customer to have the use of a car or commercial vehicle and the benefits of ownership, while the financier retains actual ownership of the vehicle.
Please note: If you are looking for information on a range of car finance options, please select: business car finance or personal car finance. "Car Lease" or "Finance Lease" is the name of a specific type of commercial car finance product.
A Finance Lease can also be known as an Asset Lease or Vehicle Lease.
How does a Car Lease work?
The financier purchases the vehicle on behalf of the customer, who then leases the vehicle back from the financier and pays a fixed monthly lease rental for the term of the lease.
At the end of the lease the customer can either pay a residual value (final instalment) on the lease and take ownership of the car, trade it in or re-finance the residual and continue the lease.
Benefits of a Car Lease
- Flexible contract terms ranging from 12 to 60 months (one to five years)
- Fixed interest rate
- Fixed monthly lease rentals
- Costs are known in advance
- A residual can be applied to a lease, lowering monthly payments
- Tax deductions are available when the vehicle is used for business purposes
- As the GST contained in the car's purchase price is claimed back by the financier, only the vehicle's price exclusive of GST is financed, lowering monthly payments
- Ability to make advance lease payments for tax deduction or cash-flow purposes
- The lease is secured against the vehicle, allowing lower interest rates
Who does a Car Lease suit?
Car Leasing is suitable for companies, partnerships, sole traders and individuals where the leased vehicle is used for income producing purposes. It is also ideal for employees who want to salary package a vehicle through a Novated Lease as part of their remuneration.
Tax implications of a Car Lease
GST is charged on the monthly lease rental and on the residual value at the end of the lease. Where the customer is registered for GST, they can claim some or all of the GST contained in the lease rental and the residual value as an input credit on their next Business Activity Statement.
Where the amount financed is below the Depreciation Limit the customer claims the lease rental as a tax deduction. Above the Depreciation Limit, interest charges on the lease and depreciation up to the value of the Depreciation Limit can be claimed.
If you are considering a Car Lease or car leasing in general, you may also want to consider other business car finance options such as a Commercial Hire Purchase (CHP) or Chattel Mortgage.
To find out what is best for you, try our easy "Which Finance Is Right For You?" online tool.
Want to know more?
If you have any questions or would like to know more about a Car Lease, please send us an online finance enquiry and one of our finance consultants will contact you shortly.
You can also get an instant online quote or approval for a Car Lease.
You may also wish to consider other business car finance & business car loan options.