FINANCE PRODUCTS
Finance Lease
What is it?
A finance lease is a fixed term, fixed rate agreement that transfers ownership of equipment upon payment of a residual. Terms are generally between 2 -5 years and residual amounts are generally governed by the Australian taxation office guidelines.
Equipment commonly leased with Finance Lease
Pros
Lessee may own equipment upon
payment of the residual
payment of the residual
There is no upfront cash outlay
Equipment ownership at end of term
Fixed term
Fixed rate over the term
Generally there is no need for
mortgage security
mortgage security
Cons
The residual is not an option
but an obligation
but an obligation
Generally rates are higher
Approval criteria is more onerous than
with an operating lease
with an operating lease
What type of business uses Finance Lease?
All types of business use Finance Lease. It is most utilised by businesses that
prefer equipment ownership.
Tax and accounting treatment for Finance Lease
Finance lease payments are generally treated as a expense item meaning that
100% of payments are expensed.
