Finance Lease
A Finance Lease or Car Lease is a commercial financial product which allows the
customer to have the use of a car or commercial vehicle, while the financier retains
actual ownership of the vehicle.
The financier purchases the vehicle on behalf of the customer, who then leases the
vehicle back from the financier and pays a fixed monthly lease rental dor the term
of the lease.
At the end of the lease the customer can pay a final instalment on the lease and
take ownership of the car, trade it in or re-finance the residual and continue the
lease.
Car Leasing can be suitable for companies, partnerships, sole traders, and individuals
where the leased vehicle is used for income producing purposes.
There are different types of leases but generally they are used for financing the
purchase of assets like cars, computers, equipment, machinery etc. It is a popular
form of financing as the business' capital is not spent, but of course the borrower
doesn't own the goods, they pay a "rental" to the financier. The full lease payment
is tax deductible if used 100% for business, but the value of the item cannot depreciate
over time. A lease agreement generally requires that a pre-agreed amount will be
owed at the expiry of the term.
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