How A Finance Lease Works
A Finance Lease is a rental agreement where the financier legally owns the vehicles and you lease it for an agreed term. The finance company purchases your vehicle and you rent it from them for an agreed monthly repayment. At the end of the term you make a final payment and the car is yours, or the finance company may elect to retain the vehicle. This however, is rare but should be considered when negotiating the residual.
A Finance Lease allows businesses to take a residual position on the vehicle for the end of the term, providing it is within the Australian Taxation Office guidelines. This allows you to set repayments to cash flow requirements and potentially reap the benefit from the vehicle selling at a higher price than the residual.
Features and benefits of a Finance Lease:
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Fixed rate finance, so you pay the same rate monthly and avoid interest rate fluctuations
Leasing is inflation friendly as the costs go up over five years, you still pay the same rate as when you began the lease
You can keep upgrading; as new equipment becomes available you can upgrade to the latest models each time your lease ends
Easier to obtain a finance lease than loans from commercial lenders
Vehicle is typically yours to keep at the end of the lease
Finance leasing offers possible tax benefits depending on lease structure