Iden Leasing

Finance Lease

Finance Lease

A Finance Lease or Car Lease is a commercial finance product which enables the customer to have the use of asset and the benefits of ownership, while the financier retains actual ownership of the asset.

The financier purchases the asset on behalf of the customer, who then leases the asset 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: a) make an offer for the goods (which the financier can either accept or reject). Generally the offer is for the residual amount and this is generally acceptable to the financier. Once the residual is paid on the lease the customer takes ownership of the asset b) Trade it in for a new asset and payout the residual with the consent of the financier c) re-finance (at the lenders discretion) the residual and continue the lease or d) return the goods to the financier. The financier will sell the goods, generally at auction, and if there is a shortfall to the residual value amount the customer must pay this amount. If there is an excess over the residual amount the financier has a right to retain this amount as it is the financier’s asset

  • Flexible contract terms ranging from 24 to 60 months (two to five years)
  • Fixed interest rate
  • Fixed monthly lease rentals
  • Costs are known in advance
  • A finance lease must have a residual value generally in line with Australian Tax Office depreciation guidelines.
  • 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 asset’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

Asset leasing is suitable for companies, partnerships, sole traders and individuals where the leased asset 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.

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.

In the case of vehicles 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.

  • Depreciation Limit - The maximum asset value that is allowed by the Australian Tax Office when depreciating a motor vehicle. For the 2009-2010 financial year, this value stands at $57,180.00