A Lease is an arrangement between the finance institution and the customer. The finance institution will purchase the asset on the customer?s behalf and then lease it back to the customer over a pre-determined period generally between 2 and 5 years.
As the finance institution is the purchaser of the asset, the finance institution claims back the GST component leaving the customer to only effectively borrow for the price of the vehicle minus GST. This set up obviously save?s the customer interest over the course of the loan as opposed to financing the full amount.
A lease must also consist of a residual which must be paid back to the financial institution upon completion of the finance term. This can be paid out by a total payout in full, a refinance or the funds can be raised by selling the asset.
Car lease payments do incur GST however can be claimed back by the company leasing the asset. Car Lease payments can also be a tax deductible expense for a company. When taking these two benefits into consideration you can see that these options do provide great financial benefits to the leaser.
Car leasing is suitable for companies, partnerships, sole traders and individuals where the leased vehicle is mainly used for income producing purposes.
Advantages: The company?s entire car lease payments can be tax deductible saving the company lots of money The finance company claims back the upfront GST portion meaning the customers only needs to borrow the purchase price minus GST, which will save a lot of interest for the company in the long run. GST component of repayments may also be claimed back by te company A car lease does not show up as a debt on a company?s balance sheet as it is a payment which is more beneficial to a company.
Disadvantages: You cannot lay down a deposit when setting up a lease however you can provide a large first payment. A trade in is not permitted when the vehicle is on a lease.
Car lease taxation implications: If the amount to be financed is below the ATO depreciation limit of, 57,009 (motor vehicles only), the full lease rental may be claimed as a tax deduction. Above the depreciation limit, the interest and depreciation up to the motor vehicles value can be claimed.
As you can see a car lease?s benefits far outweighs the disadvantages it has. If a company is looking at saving money wherever it can on its company?s fleet of vehicle?s then taking advantage of what a car lease can offer is a must.
Quantum Finance Solutions is an online car finance broker providing car finance solutions through our range of best banks and non-banks we have accreditations with. We have a good reputation for finding the best deals in the market and providing great service. www.quantumfinancesolutions.com.au
Article from articlesbase.com
Find More Lease Car Articles
