Are you looking into purchasing a new vehicle for your business and are confused about the different finance options out there?
Its ok! Most people are. That’s why we have made a small summary of the two most common finance types and what they mean for you! Although there are many options these are the two most common finance types we see in your tax returns.
Hire Purchase Lease
In this finance arrangement a finance company agrees to purchase the vehicle on behalf of the customer and then lease it back to them over a period of time. At the end of the lease the customer then pays a residual and takes full ownership of the vehicle.
The advantages of this type of lease are that there are fixed monthly repayments and a fixed interest rate, your costs are known in advance, the finance is secured against the vehicle meaning you may have lower interest rates, a tax deduction is available on the vehicle depreciation and if you are registered for GST you can claim GST on the purchase price of the vehicle and on the term charges over the period of the loan.
Under this arrangement the financier will advance the customer the money to purchase the vehicle and then will take a mortgage over the vehicle as security for the loan until the loan has been paid off.
Many of the benefits of this method are similar to that of a Hire Purchase Lease however there are some differences. The vehicle is owned by the customer from the time of purchase rather than at the end of the lease period and if you are registered for GST you can claim the GST on the purchase price of the vehicle only and not on the term charges each month. However one advantage is that a business can claim this GST on the purchase price up front in their next BAS rather than over the term of the lease.
For more information on the different options for you please feel free to contact our office and we will be glad to lend our expertise!
Did you know , not only can CATS help you with the tax implications of your finance choice, you can also contact CATS to arrange finance for your business vehicle? Through Macquarie Leasing CATS can assist you in making the process easier and ensuring you receive a competitive rate for your next vehicle purchase. For more information please contact our office.