Car Lease

A car lease, also known as a finance lease, auto lease, vehicle lease or asset lease, is a rental agreement where the finance provider purchases the motor vehicle on behalf of the customer who in turn pays the financier a fixed monthly rental amount for the term of the car lease.

When the final payment has been paid, (residual amount which is set by the ATO) the customer takes ownership of the motor vehicle.

How Does A Car Lease Work?

The lessor obtains legal ownership of the motor vehicle to be leased, by paying the amount as advised on the (vendors) supplier’s invoice. The lessee then has the use of the car and pays rent for that use for the term of the finance lease contract.

During the term of the car lease agreement, the lessee merely pays rent and does not obtain ownership or equity in the car they are leasing. Under a car lease agreement the lessee is responsible for maintenance and running costs, car-insurance and registration fees for the leased item.

Car Lease Features:

  • Low establishment fees and monthly fees
  • Residuals are set by the ATO and reduce your repayment
  • Interest rate is fixed for the term
  • Car lease terms range from 1 to 5 years
  • Car lease monthly repayments are fixed for the term
  • The car lease monthly repayment maybe 100% tax deductible
  • GST on the purchase price of the vehicle is claimed back by the finance provider on your behalf. This lowers the amount financed to the purchase price minus GST
  • GST on the monthly repayments may be claimable on your BAS
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Who Does A Car Lease Suit?

A car lease suits someone who is going to use a motor vehicle predominately for business use, therefore this car financing product is used by:

  • Low establishment fees and monthly fees
  • Residuals are set by the ATO and reduce your repayment
  • Interest rate is fixed for the term
  • Car lease terms range from 1 to 5 years
  • Car lease monthly repayments are fixed for the term
  • The car lease monthly repayment maybe 100% tax deductible
  • GST on the purchase price of the vehicle is claimed back by the finance provider on your behalf. This lowers the amount financed to the purchase price minus GST
  • GST on the monthly repayments may be claimable on your BAS

Car Lease Taxation Implications

If the amount to be financed is below the ATO depreciation limit of $57466, you may claim the full lease rental as a tax deduction. Above the depreciation limit, its similar to a commercial hire purchase agreement where the interest and depreciation up to the motor vehicles value can be claimed.

GST will be charged on your monthly payments; however it can be claimed back on your Business Activity Statement (BAS) over the term of the Car Lease contract. The monthly repayment or balloon amount is subject to GST.

Apply For A Car Lease

Got all the info you need and ready to apply for a Car Lease? Just complete our quick application form and one of PCL Moneys Car Lease experts will get in contact with you.

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