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Drive – Reliable Car Finance

Over the past few years finance companies have expanded their product offerings, and some of the European marques which include, BMW, Volkswagen and Daimler Chrysler have followed the footprints set of their parent companies, who often offer customers a complete range of banking and financial service products.

In Australia, vehicle finance companies offer products that include, insurance, credit cards, fleet management, maintenance, and even fuel cards.

Personal Lease

A personal lease is when you rent a car for a given period of time, normally this will be one to five years, and you make monthly repayments as you would when renting your home. But there is a big difference, at the end of the agreed period of rental, the vehicle may be sold or in allot of cases the finance company is able to take it back and then sell it as a used car.

You are able to use a personal lease for private or business use, however, the personal lease is commonly applied by individuals who will use their car for private or family use more than 50 per cent of the time, while some tax deductions may be available should the vehicle also be used for business purposes.

Hire Purchase

The hire purchase offers flexibility and is often used by small businesses, the same as a lease you are obliged to buy the car by making a final settlement at the end of the contracted hire purchase period and this payment is known as a balloon payment.

Should you want to increase the amount of the deposit or balloon payment, this would make the monthly repayment less. The hire purchase option generally gives businesses the ability to arrange a deal in such a way that the repayment is suitable for the business’s cash-flow and budget.

A hire purchase option is ideal for businesses that are just starting up and have a lot of expenses, tax deductions may well be available for depreciation an or interest charges.

Operating Lease

Sales representatives and delivery vehicles are hard on the road and need to be replaced frequently, in this case, an Operating Lease would be the best option.

With an operating lease, the financing company holds ownership of the vehicle between one to five years, in return, the customer will be provided with exclusive rights to use the vehicle for lease rental payments as that of a long-term hired car.

In this case, the user does not need to be concerned about the residual value at the end of the lease, the car finance company then bears the risk of losing money on the resale of the vehicle. Operating leases do not show under the assets on the balance sheet, meaning the vehicle borrowing costs do not affect gearing levels. Subsequently, the lease payment is fully tax-deductible, excluding luxury vehicles.

Chattel Mortgage

The Chattel Mortgage will suit businesses that account for their operations on a cash basis, the customer will make a series of monthly payment and a final balloon payment. These options also offer great flexibility, since the buyer is given the option to set the length of the lease payment and adjust the repayments by increasing or decreasing the deposit amount being paid or perhaps a balloon payment, this option has the same principle as that of a hire purchase agreement.

Businesses are permitted to claim back some or sometimes all of the GST that is contained in the price of the vehicle. But a business that uses an accrual accounting system may claim the GST back in one Business Activity Statement and a business that uses cash accounting must claim GST over the full period of the finance contract. This relates to a hire purchase agreement.

This may not be good for a company as it could create a cash flow problem and increases a company’s administrative burden.  But by using a chattel mortgage allows a cash business to claim the GST back in one hit as per the rules of the tax office.