frequently asked questions
A finance lease allows your business to immediately acquire the motor vehicle or plant and equipment of your choice in exchange for a series of rental payments.
Why use Absolute for Leasing?
A Novated Lease is an agreement between the employer, the employee and the underwriter.
This allows the employer to offer their employee a leased vehicle as part of their remuneration package. The employee is able to use the motor vehicle of their choice while the employer pays the lease rentals on behalf of the employee. If the employee leaves for any reason, the liability of the employer ceases.
The vehicle is registered under the employee’s name, and the options at the end of the lease are as stated above.
Let’s assume you purchase for cash a standard motor vehicle sedan with a purchase price of $20,000 and the vehicle is to be utilised predominantly for business purposes.
The vehicle will appear on your balance sheet as an asset for $20,000. The tax office changed the methodology on depreciation and introduced an effective life policy on the 21/09/1999. For motor vehicles the effective life is (7) seven years, travellers’ cars (5) years and taxis 4 years.
As a guide only, when applying the Diminishing Value method for depreciation for a standard vehicle (this would approximately equate to 22.5%), the motor vehicle’s written down value each year and the residual percentage applied to your lease (assuming the vehicle was purchased on the 01/07/2000) would be as follows:
Therefore, a three (3) year lease would normally have a residual of approximately 40% (max.50%) whilst a (four) 4 year lease approximates to a 35% residual (max. of 40%).
There are variances to the above including lower residuals for rental vehicles or similar high usage vehicles. High residuals may apply for prestige vehicles.
Note that GST applies to the rental and residual value.
The above is a guide only and as a rule you should seek clarification from your accountant.