Finance lease is a commercial finance product which enables the end-user to have the use of commercial equipment and the benefits of ownership, while the financier retains actual ownership of equipment. A Finance Lease can also be known as an Asset Lease or Vehicle Lease.
With a Finance Lease, the financier purchases the equipment on behalf of the customer, who then leases the equipment back from the financier and pays a fixed monthly lease rental for the term of the lease.
In this arrangements, the financier purchases the equipment on behalf of the customer, who then pays the financier a fixed monthly lease rental for the term of the lease.
At the end of the lease the customer can either pay a residual on the lease and take ownership of the equipment, sell the equipment or re-finance the residual and continue the lease.
Finance leases have a number of benefits:
- Flexible contract terms
- Fixed interest rates
- Fixed monthly lease rentals
- Costs are known in advance
- A residual can be applied to a lease, lowering monthly payments
- Your equipment does not sit “on your books” as an asset/liability
- Tax deductions for the lease payments can be claimed
- As the GST contained in the vehicle’s purchase price is claimed back by the financier, only the equipment’s price exclusive of GST is financed, lowering monthly payments
- Ability to make advance lease payments for tax deduction or cash-flow purposes
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