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Finance Lease
Under a Finance Lease Agreement, the financier purchases the equipment on behalf of the client and then the customer rents the equipment back from the financier over a specific term.
Ownership of the equipment is transferred to the customer once the residual payment has been finalised.
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Finance Lease
Overview of a Finance Lease for Truck Finance
A Finance Lease Agreement is a funding mechanism where the financier purchases the specific truck or heavy equipment on behalf of the client. The client then effectively rents the equipment back from the financier over a predetermined lease term. This structure is ideal for businesses that prefer to treat the asset as an off-balance-sheet item for accounting purposes.
Throughout the term of the agreement, the client has the full operational use of the vehicle in exchange for fixed, regular rental payments. These payments are typically structured to be fully tax-deductible as an operating expense, which can be highly advantageous for managing taxable income and cash flow.
Crucially, the client gains the option of ownership at the end of the term. Once the final residual payment (agreed upon at the contract's start) has been finalised, the ownership of the equipment is officially transferred to the customer. This provides the flexibility of rental with the guaranteed option of eventual ownership.
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Asset Security
Features of a Finance Lease Facility
- no deposit required
- excellent product for new start businesses
- term of a lease can range from 12 months to 60 months
- fixed interest rate applies
- ownership of the asset is transferred to the client when the final payment or residual payment has been made by the customer
- payments can be made weekly, monthly, quarterly, yearly or structured (i.e. agreed payments over different times of the year)
- residual payment at the end of the term is applied to the loan
- 100% of the cost of the asset is financed
- full payment is claimed as a tax deduction reducing tax paid to the ATO
- full payment is claimed as a tax deduction reducing tax paid to the ATO
- financier claims the full gst on the purchase price as an input tax credit as opposed to the customer
- client pays the gst on the monthly payments and the residual
- residual amounts and term of the Finance Lease facility are governed by ATO guidelines
- asset risk lies with the customer at the end of the term as they are responsible in paying out the residual payment
Tax Advantages
Benefits of a Finance Lease Facility
- No deposit required allowing businesses to preserve cash flow and maximise working capital position
- Flexible payment options allow clients to make payments suitable to their cash flow
- Fixed payments allow businesses to accurately project income and expenses going forward
- Finance Leases for heavy equipment can be assessed on either a full doc or low doc basis
- As these types of loans use the equipment as security, it allows clients to free up property equity to pursue other investment opportunities
- Residual payment applied to the loan so as to reduce monthly payments paid by the customer over the term of the loan
- Residual can be paid out in full by the customer at the end of the term the residual can also be refinanced into another loan at the end of the term
- Residual could be paid out by the dealer when client goes to upgrade to a newer machine
- 100% of the monthly payment is claimed as a deduction on clients profit and loss statement
- Finance Leases are treated as off balance sheet lending which improves the balance sheet position of the businessno deposit
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Start Now and complete our Quick Assessment Form to obtain a Pre-Approval up to $500K – decision within a few seconds.
Alternatively, you can call one of our Finance Consultants to discuss your funding scenario.
Example Breakdown
Example Funding Scenario
- Purchase Price of second hand truck for new start business – $110,000 (gst inc)
- Finance Type – Finance Lease
- Loan Amount – $110,000 (client could borrow full amount with no deposit)
- Term – 60 months
- Residual – 30% or $33,000 (gst inc)
- Payments – monthly in advance
Outcome
- Client did not have to put in a deposit which meant they could use their own funds to cover short-term business expenses
- Client could claim the full monthly payment as a tax deduction on their profit and loss – minimising tax paid to the ATO
- The 30% residual payment reduced payments on the loan over the 5 year period allowing client to maximise cash flow for ongoing projects (payments are only calculated on $110,000 less the residual amount of $33,000)
- Fixed interest rate allowed client to easily budget for ongoing expenses
- The Finance Lease is treated as off balance sheet allowing them to increase their borrowing capacity going forward as this liability does not appear on their balance sheet
Customer Reviews
Our customers say it best. Find out what it's like dealing with the Experts in Truck Finance. You could be the next success story.
Nathan you are fantastic to deal with. Always prompt with deals never a hiccup. After 8 truck deals will never use another broker. Keep up the great work you make my life stress free.
TH
Tracey Hall
Scone Equine Transport Pty Ltd
I have been dealing Heavy Vehicle Finance since 2014 and have found them be nothing short of amazing.They have funded various trucks and trailers for me over the years and its a fantastic feeling to know that I still have the same account manager after all of these years of business.It is very good to know that a finance approval is only a phone call away.
CW
Colin Wallace
Palanquin Pty Ltd
I have used the team at Heavy Vehicle Finance twice now for our financing needs for prime movers and side tippers. A Great team to work with and very prompt and professional. We will use again in the future.
JC
James Coustley
JJC Civil
I have used Nathan and his team for multiple purchases for our earthmoving company and Nathan has gone above and beyond to help us with expanding our business. I couldn’t recommend Nathan more highly.
SW
Sam Wood
Sureflo Plumbing & Roofing Contractors Pty Ltd
We used Heavy Vehicle Finance for the purchase of our Truck. They went above and beyond for us and made sure that the process was as stress-free as possible. The entire interaction was nothing short of amazing. We will definitely be using them again in the future.
MM
Meagan McNicholl
Next Gen Transport Pty Ltd
Can’t thank Nathan enough for how fast and professional he was with organising my finance for my new truck. He was straight to the point with no stuffing around. Highly recommended
TH
Tim Hartas
Hartrax Contracting Pty Ltd
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