Chattel Mortgage

A Chattel Mortgage (also known as a Bill of Sale or Equipment Loan) is a loan agreement where the funds are borrowed to purchase equipment or trucks for commercial purposes, and a charge is taken over the goods that are financed.

  • Equipment is owned by the borrower
  • Can be 100% funded or equity (e.g. deposit or trade) can be contributed
  • Balloon payment can be included
  • Tax deduction is generally the interest on the facility and depreciation
  • If registered for GST, the GST on the purchase price can usually be claimed

Hire Purchase

A Hire Purchase (also known as Offer to Hire) is an agreement which sets out that during the hire period (term) the Financier owns the asset and the hirer pays regular instalments, with ownership of the asset automatically passing to the hirer once the final payment is made.

  • Equipment is owned by the Financier but is transferred to the hirer at the end of the term
  • Can be 100% funded or equity (e.g. deposit or trade) can be contributed
  • Balloon payment can be included
  • Tax deduction is generally the interest on the facility and depreciation
  • If registered for GST, the GST on the purchase price may bebe claimed
  • Depending of which accounting system (cash or accrual) is utilised, this will affect how the GST can be claimed. We also recommend that independent accounting advice should be sort.

Finance Lease

A Finance Lease is an arrangement for financing equipment where the Financier retains title and the asset is leased to the borrower, for an agreed term and rental amount. A residual value is set to reflect the asset’s value at the end of the term.

  • Equipment is owned by the Financier
  • 100% funding with no equity allowed (e.g. no deposit)
  • Residual value based on tax guidelines
  • Repayments are generally tax deductible in full
  • Whilst there is no guarantee of ownership, the usual case is the Financier will offer for sale at the end of the term the equipment at the residual value.

Rental

A Rental (also known as an Operating Lease) is an arrangement for financing equipment where the Financier retains title and the asset is rented to the borrower, for an agreed term and rental amount.

  • Equipment is owned by the Financier
  • 100% funding with no equity allowed (e.g. no deposit)
  • Repayments are generally tax deductible in full
  • No guarantee of ownership. The Financier may offer to sell the equipment at the end of the term, the equipment may be returned to the Financier or the Financier may agree to refinance the equipment.

Company Cars and Novated Lease

In recent years, Novated Leases have become a popular alternative for businesses wishing to provide their employees with motor vehicles.

A Novated Lease is effectively an agreement between the employee (a lessee), their employer and the finance company (the lessor).

It operates by creating a Finance Lease Agreement (refer to the Lease Agreement Section on this page) between the employee and the lender. A Novation Agreement is then entered between all parties, which transfers responsibility for the lease rental commitment to the employer during the lessee’s period of employment. On the employee leaving employment, the novation ends, with ongoing responsibility for the lease returning to the employee.

As motor vehicles acquired this way are leased by the employee, there are benefits for your business and your employee. These could include:

  • Potential to remove the vehicle fleet from your balance sheet.
  • Eliminating administration and maintenance costs involved in managing a fleet.
  • The ability to negotiate payment of vehicle running costs with your employees.
  • Freedom for your employees to choose their motor vehicle while enjoying the benefits of a company car.
  • No on-going company responsibility for the vehicle should an employee leave.

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