Different aspects of buying or leasing a truck appeal to varying businesses. Tax, ownership status, and GST are a few of the primary reasons many companies decide on one or the other. However, other factors like how often you want to upgrade vehicles, your past credit history, and how reliable and extensive your cash flow forecasting is can influence your decision too.
The fact is, even when you‘ve decided between leasing and buying, you still have some choices to make – and each one can affect how costly or cheap truck finance is. Please see your finance options below:
Chattel Mortgage Truck Loans
Chattel mortgages are basically a secured commercial vehicle loan. They‘re a popular, flexible finance option with businesses in many sectors, but can work particularly well for relatively expensive assets like trucks and transport equipment like trailers and tankers.
Pros of a Chattel Mortgage:
- Terms between one and seven years
- You claim back 100% of the purchase price GST when you file your next BAS
- There‘s no more GST to pay – on either repayments or the residual amount
- Residuals are adjustable – so you can tailor repayments to your cash flow
- Claim the interest on repayments as a business expense throughout the term
- The truck is your asset from day one, so you can claim for depreciation
- Use a deposit in the form of cash or a trade-in truck, or finance the entire purchase price
- Modify the truck as you please, during the term and after
Cons of a Chattel Mortgage:
- Trucks depreciate by as much as 20% in the first year
- You can‘t claim for the principal-related repayment portion
- You pay down the value of the vehicle over the course of the agreement, plus the GST on the purchase price
- Truck servicing and maintenance costs are high (some leases allow you to bundle expenses and benefit from lender-negotiated rates)
Finance Lease
A finance lease enables businesses to use a truck for a fixed period between one and five years. At the end of the term, you get the option to pay out the ATO-set residual and own the vehicle, refinance the residual amount and effectively extend the lease, or sell the truck and move on to a new one.
- 100% of repayments are tax-deductible
- Finance gets based on the ex-GST value of the truck
- Flexible end-of-lease options
Operating Lease
Operating leases are probably the easiest way to get access to a truck without taking on risks. You can bundle all or some of the running costs into the package, such as servicing and maintenance, fuel, tyres, breakdown cover, and insurance. You pay a fixed monthly fee over a pre-agreed term ranging between one and five years. When the lease is over, you can hand the truck back or make an offer to purchase the vehicle.
- Repayments are a cost of doing business and tax-deductible
- Finance gets based on the ex-GST value of the truck
- No ownership or disposal risks
- End-of-lease Options: Hand the vehicle back or buy
