frequently asked questions

Finance Lease

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.

• The term of the lease can range from one to five years
• Minimum lease amount is $10,000, maximum $300,000
• Competitive interest rate from 7.99% (fixed rate)
• Rental payments are monthly using direct debit
• At the outset a residual value is set (which is an estimate of the vehicle worth at the end of the lease period, in accordance with Australian Taxation Guidelines - see example below)
• At the end of the lease you have several options:

  Make an offer to purchase the motor vehicle for the residual value. As you have no right to purchase the goods at the end of the lease period an offer may be considered, which is consistent with taxation guidelines

  Return the motor vehicle to the underwriter to sell on your behalf however; you will be required to meet any shortfall that eventuates from the sale

  Trade in the vehicle and lease a new vehicle. You must ensure that the trade in amount is adequate to pay out the existing lease

Why use Absolute for Leasing?

• No major capital outlay, you retain cash flow
• If the motor vehicle or plant and equipment are used for generating assessable income the lease rentals can be tax deductible
• Fixed payments allow accurate budgeting and protect you from rising interest rates and inflation
• A one-off establishment fee of $200 is charged to set up approved loans. There are no regular monthly fees on established loans
• You can choose your own supplier and negotiate on price
• In the majority of loans provided the only security required is the motor vehicle or plant and equipment

Did you know that Absolute Finance leasing on motor vehicles can also be novated?

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.

Residual Value Estimate based on Taxation Guidelines:

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.

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