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Finance Lease

Thu, 2008-04-24 09:43 — Broker

Finance Lease

It is common for the generic term of lease to be used when financing an asset, however a finance lease is rarely used these days.

A finance lease does not have the flexibility offered by either a Commercial Hire Purchase, CHP, or Chattel Mortgage.

A Finance Lease is an agreement whereby the Lessor (The Financier or Lender) rents the equipment to the Lessee (Borrower) who has the right to use the goods for the period of the lease, but no claim to title.

A residual value is set with the lessee guaranteeing the financier for this amount. Under a finance lease the financier is invoiced for the sale of the asset. As a result the financier has the liability for the GST. The quote for finance is therefore calculated on the GST exclusive price of the asset.

The residual value will be set based on the depreciation value of the asset and the term of the finance. This residual is set in line with the Australian Tax Office rulings.

Obviously as a borrower you should seek advice from your accountant or financial adviser when considering the motor vehicle or plant and equipment finance option that best meets your needs.




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