Commercial Finance

Asset Lease

What is an asset lease?

An asset lease gives your business the exclusive right to use an asset for a period of time.

The lender purchases the asset on your behalf and allows you to use it in return for monthly lease payments. At the end of the lease, you may be able to buy the asset at an agreed price, return it, renew your lease agreement, or make a new agreement with different assets.

Leases can be used to finance all kinds of business vehicles and equipment, including cars, trucks, forklifts, communication systems, and office equipment. Finance is usually secured against the leased equipment.

Asset Lease

What are the benefits?

An asset lease can be a great way to access the latest vehicles and equipment without the risks of ownership. There’s no need to worry about depreciating assets and there’s no risk that you’ll get stuck with outdated equipment that you can’t use or sell. Upgrading your equipment is easy and often possible during the term of the lease.

Asset Lease Works

Features of an asset lease

  • New or used vehicles/equipment
  • Flexible lease terms, from 1-7 years
  • Multiple end-of-term options
  • 100% finance
  • Structured repayments to suit your cashflow
  • Fixed interest rate
  • Optional service agreements and add-ons
  • Residual value or “balloon” payment
  • Potential tax benefits.

* Please refer to your accountant for eligibility

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Common questions about Asset Lease

To qualify for an asset lease, you must be:

  • A company, partnership, or sole trader
  • Based, registered, and operating in Australia
  • Registered for GST
  • Leasing a vehicle or equipment for business use.

An asset lease can offer tax advantages during the term of the lease. Depending on your circumstances, you may be able to:

  • Claim your lease payments as a tax deduction
  • Claim input tax credits for the GST on your lease and balloon payments.

You should refer to your accountant or tax advisor for more information about how an asset lease would affect your business.

A residual value or “balloon” payment is a lump sum that isn’t covered by your regular repayments. Your repayments will be lower, but you’ll have a large amount outstanding at the end of the term. Some business owners choose to set up a balloon payment at the expected future trade-in value of the asset.

A finance lease is a long-term form of lease suitable for assets you eventually want to own. While the financier retains legal ownership of the asset during the course of the lease, you enjoy the benefits of ownership, take control of the asset, and assume the costs of maintenance, insurance, etc. At the end of the lease period, you may be able to purchase the asset following payment of a residual sum.

An operating lease is a short-term lease suitable for assets with a relatively short lifespan and high risk of obsolescence. The financier retains legal ownership of the asset and takes responsibility for maintenance, insurance, and other ancillary costs. At the end of the least period, you can choose to return the asset, renew your lease agreement, make a new agreement with different assets, or purchase the asset at its current market price.

In Australia, asset lease interest rates currently start at around 4.50% p.a. Your interest rate will depend on your choice of lender, as well as:

  • Nature and age of the asset you are financing
  • Loan amount and term
  • Frequency of repayments
  • Your business and personal credit history
  • Nature and age of your business
  • Financial health of your business
  • Your trading history
  • Your monthly revenue.