A finance lease enables you to have the use of your equipment and the benefits of ownership, while the fianncier retains actual ownership of the equipment.
How does a lease work?
- The financier purchases the equipment on behalf of the customer who then pays the financier a fixed monthly payment for the term of the lease.
- At the end of the lease, the customer can either pay a residual on the lease and take ownership of the equipment, sell the equipment or re-finance the residual.
A novated lease combines many features of more traditional forms of equipment finance to deliver some attractive benefits for both employers and employees.
A novated lease has become an increasingly popular form of equipment financing over recent years. A novated lease will suit any employee who wants to include a vehicle as part of their salary package, so long as their employer offers salary packaging as an option for employees.
How does a novated lease work?
- A novated lease is an agreement between your employer, yourself (the employee) and the financier, where the obligation to meet the repayments under the finance lease is with the employer.
- Under this arrangement, the employer pays the repayments on behalf of the employee,, and provides the vehicle for the employee to use as part of their salary packaging arrangement.
- If an employment ceases for any reason, or the lease agreement is finalised, the novation ceases and the obligations assumed by the employer revert back to the employee.
An operating lease is simply a rental agreement. You avoid the risks associated with ownership and have no residual value liability.
At the end of your operating lease agreement you may simply return the equipment and you owe nothing further which means no liability in terms of residual values or FBT for the company following the end of the lease.
Only available through businesses, the benefits of an operating lease vs finance lease are that working capital is maintained, rentals will be fully tax deductible if the equipment is used to generate taxable income and there is no resale value risk as the financier will own the asset at the of the operating lease. Fully maintained operating leases can also include ongoing maintenance costs such as equipment servicing and fuel costs all in one regular monthly payment. This can greatly aid the business cash flow as precise equipment running costs are know well in advance.
For this reason, operating leases are generally the simplest path to equipment ownership for many businesses.
Commercial Hire Purchase
How does a commercial hire purchase work?
- Under a Commercial Hire Purchase (CHP) arrangement the financier agrees to purchase the equipment on your behalf, and then hires it back to you over a set term.
- You have use of the equipment for the term of the contract but you are not the owner.
- You take full ownership of the equipment at the end of term when the total price of the equipment (minus any residual) and the interest charges have been paid in full.
A chattel mortgage is a commercial loan product where the customer takes ownership of the equipment at the time of purchase.
How does a chattel mortgage work?
- Under a Chattel Mortgage the financier advances funds for the purchase of the equipment and the customer takes ownership at the time of purchase.
- The financier then takes a charge over the equipment as security for the loan.
- Once the contract is completed, the charge is removed giving the customer clear title to the equipment.
Equipment rental is a smarter way to keep up with technology and maximise your investment in technology that rapidly depreciate.
Credit One provides specialised rental finance to all business and industry sectors. Our solutions are tailored to your business needs allowing you to access a range of innovative services which embrace the entire IT asset life-cycle and helps you manage your cash flow.
Rental finance is a competitive "off balance sheet" financing tool that provides the renter with greater flexibility and reduces the risks associated with owning equipment that is of a technological nature and is subject to obsolescence within a 3 to 4 year period (i.e. Computer Hardware and Software equipment).
Benefits of Equipment Rental
- Available for most asset types
- Avoid technology obsolescence
- Off balance sheet reporting
- Obtain the latest technology now
- Tax deductible payments
- Preserve your cash flow
- Flexible end of term possibilities
- Fixed regular payments for ease of budgeting