Leasing a car for business
How Leasing a Car for Business Works
More and more Australian companies and sole traders are leasing a car for business every year, but it’s also one of the most well-established forms of business vehicle finance – and that’s true for several reasons. When you choose to lease a car for business, you get several options, and picking the right one can save you time, money, and reduce operating problems. Whether you want to own a vehicle or explore business car leasing options where you can upgrade relatively frequently, there’s a finance option out there.
Using a Savvy Commercial Finance Consultant
Savvy’s expert business finance consultants don’t just know commercial leasing products inside-out, they get access to a vast lender panel too. That means when you trust Savvy to source business car leasing offers, you can be safe in the knowledge you’re opening up more choice and competitive interest rates. We partner with more than twenty-five of Australia’s foremost wholesale and niche vehicle lease lenders, so no matter what car you’d like to use, or how you’d like to use it, we can help find the most cost-effective solution.
Why trust Savvy for business car leasing?
Leasing a Car for Business? You Get More Options With Savvy
Leasing a Car for Business: Finance Leases
A finance lease is a way of owning a business vehicle at the end of the finance term, but not during the agreement. The lender buys the car, and you make payments based on the value of the vehicle minus the residual, which becomes due at the end of the term. When the lease ends, you can choose to pay the residual and take ownership, refinance and extend the term, or sell the vehicle and start another finance arrangement.
- Earn equity in the car every time you make a payment
- Opt to own the car, refinance, or dispose of the vehicle when the term ends
- Fixed payments, based on the car’s value during the term
- Lease over one to five years
Business Car Leases: Operating Leases
Operating leases are the go-to car lease option for businesses that want to get use of vehicles without owning or taking care of admin. Operating leases are more like a long-term vehicle rental arrangement where the lender arranges servicing, maintenance, registration, and even insurance – although users can choose to include whatever elements they wish in many operating lease agreements.
- Get fully maintained vehicles and outsource administration for registration, servicing, and maintenance
- The lender retains disposal and residual value risks
- End of lease options include returning the vehicle or negotiating a purchase price
- Terms run from 12 to 60 months
Sale and Leaseback Business Finance
Some specialist lease providers offer sale and leaseback facilities to business customers. That’s basically an operating lease arrangement for cars you already own. If you’d prefer to outsource vehicle admin and release any capital tied up in a car, the lender will buy it and then lease it back to you.
- Outsource administration for servicing, registration, and maintenance
- Free up capital
- Get the benefit of lender-negotiated rates for fuel, servicing, and maintenance
- Terms run between one and five years
The Benefits of a Novated Car Lease
Novated leases are a three-way finance arrangement made between yourself, your employer, and a lender. Employees use pre-tax earnings to buy a car, which reduces your income tax. You can’t use a novated lease if you’re a sole trader, but the option is available as long as you get paid a salary.
- Make lease and running cost payments from your earnings, before you pay tax, reducing your taxable income as you buy
- The lender buys your car and then claims back GST, so you save thousands on the purchase price (equal to around $4,500 on a $50,000 vehicle)
- You benefit from lender-negotiated running costs like servicing, fuel, tyres, and general maintenance
- Lease over anything between 12 and 60 months
The Chattel Mortgage Finance Solution
Leasing is just one option open to business users. With a car lease, businesses either don’t own the asset at all or take ownership at the end of the term, but a chattel mortgage means you own the car from the start of the agreement. That has some tax and GST implications:
- GST charged on the purchase price can be claimed back as soon as you lodge your next Business Activity Statement
- GST doesn’t apply to monthly repayments
- You also don’t get charged GST when paying off any residual amount at the end of the term
- The interest portion of repayments gets classed as a business expense and is tax-deductible
- You can claim depreciation on the car from day one
- Terms between two and seven years
With a chattel mortgage, residuals don’t have to be set to ATO guidelines, so borrowers can use the balloon payment to reduce or increase repayment amounts. A chattel mortgage gets secured against the car, so interest rates remain relatively low, and they’re also fixed throughout the term. You can choose to use a trade-in or cash deposit with a chattel mortgage, so it’s a great option if you want to dispose of existing vehicles without the hassle of selling them.