A car lease (or ‘finance lease’) is a form of car finance which enables business owners, employees, contractors or self employed to have the use of a car (or commercial vehicle, motorcycle, or another form of suitable transport) and all the benefits of ownership, with the tax benefits that come from having another company (in this case the finance company) maintain ownership of the vehicle. In short, Car leases operate on the basic premise that the lender owns the vehicle, and the borrower rents (leases) it via monthly payments.
It’s simple: You find a vehicle you want, the financier purchases it on your behalf and you then lease it back from them for an agreed (and fixed) monthly payment.
When the lease is up, you can either re-finance the residual amount and continue a new lease on that vehicle for another set period, or, pay a final instalment for the ‘residual value’ of the lease and take ownership of the car. You can trade it in and upgrade to a new vehicle.
Read more in this article: How Do I Lease A Car?
There are several scenarios where it may be better to lease a vehicle than buy one outright, including:
Read our article on whether to lease or buy a car for more information.
It depends, If you’re using a vehicle for work or business purposes more than 50% of the time, a car lease may be the right option for you. Car leases are suitable for:
A novated lease allows a business to lease a vehicle on behalf of their employee. Essentially, a novated lease is an agreement between the employee, employer and finance company where the employee enters into a car lease with the finance company, while the employer agrees to take on the payment obligations (which is included in the employee's salary).
The responsibility of the lease falls with the employee, with lease payments deducted from the employee's pre-tax income (also known as salary packaging). If the employment is ceased for whatever reason, the novated lease contract also ceases and any financial obligations are then reverted to the emplyee. Novated leasing is a great way to get the tax benefits of a car lease without needing a separate ABN.
Contact us today to talk to a finance specialist about which option is best for you, or learn more about other business car loan options here.