Finance lease
A finance lease with a residual at the end.
Fixed rentals now, the option to own at the end. Suits a business that wants lower rentals and to decide on ownership later.
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Finance lease at a glance
- Amount
- $5,000 to $5,000,000 asset value
- Term
- 1 to 7 years, fixed
- Security
- The asset itself, which the lender owns during the term
- Time to funds
- Varies by lender
- How you pay
- Fixed monthly rentals, then a residual to own
Indicative, and subject to lender assessment. Your options are typically ready within 24 hours of receiving your documents.
Is it right for you?
When a finance lease fits, and when it doesn’t.
Often fits
- Lower monthly rentals, with the ownership decision deferred
- You intend to own the asset at the end, via the residual
- A term matched to the asset’s useful life
- Smaller equipment through to major plant
Usually not
- Claiming GST upfront and owning from day one, where a chattel mortgage may fit
- No intention to own, where an operating lease may fit
Business funding, compared on real data, in three steps.
How It WorksCompared
A finance lease or a chattel mortgage?
| Finance lease | Chattel mortgage | |
|---|---|---|
| Ownership during the term | Lender owns the asset | You own the asset from day one |
| GST | GST included in each payment, no upfront credit | GST credit typically claimed upfront |
| End of term | Pay the residual to own, refinance it, or return the asset | Pay any balloon; you already own it |
| Best suited to | Lower monthly rentals with a deferred residual decision | Businesses that want the upfront GST credit and immediate ownership |
What it costs
How you pay, and what it costs.
- Rentals
- Fixed monthly, with GST included in each payment
- Residual
- Typically 10% to 50% of asset value, payable at end of term
- Rate
- Depends on asset age and business profile; shown for each option in your report, with the APR beside it
- Early exit
- Ending before the end of term may attract break costs
Rental calculator
See what a fixed rental could look like.
This calculator estimates the fixed monthly rental only, based on an indicative 7.5% p.a. over a 5-year term. It does not include the end-of-term residual or balloon payment. Your Compare Report shows the exact rate and residual terms each lender offers.
- Rates shown are simple p.a.; your report shows the APR.
- Results are approximate and exclude lender fees. Not an offer of credit.
- Fixed monthly rental
- $2,004/mo
- Total repaid over term
- $120,228
- Total interest cost
- $20,228
Illustrative only, based on an indicative 7.5% p.a. over 5 years and excludes any residual or balloon payment due at the end of the term. Your Compare Report shows the exact rental and residual structure each lender offers your business.
Questions about finance leases.
What is the difference between a finance lease and an operating lease?
The key difference is ownership. With a finance lease, you have the option, and usually the intention, to own the asset at the end of the term by paying a residual. The asset appears on your balance sheet as both an asset and a liability. With an operating lease, you simply use the asset and return it at the end of the term, with no ownership transfer.
What is a balloon or residual payment?
A balloon payment, also called a residual value, is a lump sum due at the end of the finance lease term. Setting a balloon reduces your regular rental payments during the lease. Balloon percentages typically range from 10% to 50% of the asset value; for vehicles, the ATO sets minimum residual values by term. A higher balloon means lower monthly rentals but a larger lump sum at the end.
How is a finance lease treated for tax purposes?
It depends on how the lease is structured and on your circumstances. Lease payments are often deductible, and GST is included in each lease payment rather than claimed upfront as with a chattel mortgage. Always consult your accountant for advice specific to your situation.
What happens at the end of a finance lease?
You typically have three options. Pay the residual amount and take full ownership, which is the most common choice. Refinance the residual over an additional period. Or return the asset to the lender, though this is less common since the intention of a finance lease is usually ownership.
How do we get paid?
Comparing costs you nothing. Not comparing can cost you plenty.
The headline rate rarely tells the whole story. Fees, charges and loan terms can add far more to what you repay. That’s why your Compare Report shows every cost we can identify side by side.
In most cases, the lender pays us, and only if you decide to proceed with their product offer. For more complex deals, or where the lender pays us little or nothing, we may charge a fee for our service. It doesn’t happen often, but when it does, it’s shown on your Compare Report and we’ll walk you through it before you decide.
No obligation to proceed, ever.
Related
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Or talk to us: 1300 161 641 · support@tradefunding.com.au