In a Vehicle lease, the finance company purchases the vehicle and then leases it back to you over a fixed term. At the end of the term you can elect to pay out the residual and own the vehicle outright or to trade it in. The other option is to refinance the residual amount owing for a further period.
Fixed lease payments make budgeting easier, and flexible contract terms and residuals enable you to tailor the monthly repayments to suit your requirements.
On purchasing the vehicle, the finance company will claim back the GST, this means you finance the purchase price less GST. For example the finance company purchases the Vehicle of you choice for $33,000, they then claim back the $3,000 GST and lease the vehicle to you for $30,000.
Lease payments are made form pre-tax income, not after tax profits and where a vehicle is used for income producing purposes a tax reduction may be claimed.
Lease payments attract GST, which may be claimed back by business owners and companies registered for GST.
There are a number of tax office rulings which affect leasing. Where the amount financed is below the Depreciation Limit, interest charges on the contract and depreciation up to the value of the Depreciation Limit are tax-deductible.
Other Features:
- Lease payments are fixed enabling you to plan your cash-flow.
- You can make a rental payment up front, reducing your monthly repayments or the term of the lease.
- Lease payments can be direct debited from your bank account.
- Lease terms range from 24 to 60 months.
- You may elect to make extra payments at certain times of the financial year to minimize your tax liability.
- The lease is secured by the vehicle.