Leasing is generally described as Asset finance. This type of finance is specifically designed for the acquisition of vehicles, trucks & equipment. Finance / lease contracts are normally written on a fixed interest basis, with payments being predetermined and fixed for the term – placing you in a position to plan your cash flow more accurately.
Generally there are 3 categories of assets that can be financed under a leasing type of product.
- Category 1. - New cars (0 to 2yo) and used cars (3 to 7yo)
- Category 2. - Trucks, Earthmoving, Agricultural goods, etc.
- Category 3. - Business & Professional equipment, Industrial Plant & equipment, other goods, etc.
The types of finance options available are: -
An agreement to purchase equipment subject to payment terms. During the term of the hire purchase agreement, the financier owns the vehicle or equipment, with ownership automatically transferring to you when you make the final payment.
A popular form of financing for companies and business professionals to purchase goods i.e. motor vehicles, plant, equipment, etc - which are generally for business use more than 50% of the time. You or your business / company take ownership of the goods upon delivery and the financier registers a charge over the goods.
An agreement to rent equipment for use in your business for a fixed period. Can be efficient and cost effective, particularly if you continually upgrade your vehicles and equipment or only interested in renting and not owning an asset. At the end of the lease period, you return the vehicle or equipment to the financier, subject to any return conditions, without obligation for any residual value.
Flexible and convenient way of acquiring a vehicle for both employers and employees.
The employee can lease a vehicle, while the employer pays the rental and other running costs (if applicable) directly from the employee’s salary.
Should the employee leave, the agreement automatically ceases. Responsibility for the lease reverts to employee and the employer no longer has any obligations.
Possible Benefits of Leasing / Asset Finance
- Working capital & lines of credit are preserved for use in your business
- Payments can be structured to suit your particular cash flow pattern
- Simplified documentation requirements which means a quick turnaround between the initial inquiry and funding
- Possible depreciation benefits
- Reduce repayments via residual / balloon availability for some goods
- 100% finance is available and sometimes deposits can be optional