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Features of a Lease

  • term of a lease can range form 12 months to 60 months
  • fixed interest rate applies
  • ownership of the asset is transferred to the client when the final payment or residual payment has been made by the customer
  • payments can be made weekly, monthly, quarterly, yearly or structured (i.e. agreed payments over different times of the year)
    residual payment at the end of the term is applied to the loan
  • 100% of the cost of the asset is financed
  • full payment is claimed as a tax deduction at the end of the financial year on customers profit and loss statement
  • financier claims the full gst on the purchase price as an input tax credit as opposed to the customer

Benefits of a Lease

  • financing heavy machinery using a lease product as opposed to using own funds, will preserve cash flow to maximise working capital position
  • financing capital equipment (older than 20 years of age) can be facilitated through a lease
  • flexible payment options allows clients to make payments suitable to their cash flow
  • fixed payments allow businesses to accurately project income and expenses going forward
  • leases for heavy equipment can be assessed on either a full doc or low doc basis
  • as these types of loans use the equipment as security, it allows clients to free up property equity to pursue other investment opportunities
  • residual payment can be paid out at the end of term (by way of trade in or cash payment) or refinanced (by way of a new loan agreement)
  • tax deductibility at end of the financial year