These are commercial lending products and not covered by the National Consumer Credit Protection Act.
There are various types of lease finance, the most common lease is a finance lease. In a finance lease the lessee (customer) finds a motor vehicle or plant and equipment (“goods”) and the finance company purchases the goods on their behalf. The finance company calculates a regular lease rental which is paid monthly/quarterly or seasonally to suit the customer’s cash flow. The rental includes GST.
At the end of the term a residual value is still owing and the customer normally gets the option to purchase the goods for the agreed residual value, plus GST.
Once the final payment has been received ownership of the goods passes to the customer.
A fixed charge is registered with the PPSR (Personal Property Securities Register) to alert any potential future buyers, that a loan exists over the goods which must be cleared before being re – sold. The financier releases the charge upon completion of the lease transaction.
In this case the finance company purchases the vehicle and charges a regular monthly rental for the use of the motor vehicle or plant and equipment (“goods”). At the end of the term the finance company takes back the vehicle, the customer has no responsibility to buy the goods and can return them to the finance company.
Other expenses can also be included in the rental payment including the ongoing maintenance, fuel and other running costs which are incorporated into the monthly rental. This rental payment is determined at the commencement of the lease agreement.
A novated lease is ideal for employees who have an option of having a motor vehicle as part of their salary package. The employer pays all rental payments to the finance company and the employee enjoys full use of the motor vehicle.
The employee, novates the lease to their employer, who assumes some of the employee’s rights and obligations under the lease, including responsibility of meeting the lease rentals.
The contract is in the name of the employee who remains responsible throughout the lease and maintains effective control of the vehicle at all times.
If the employee leaves the company, the vehicle remains with the employee. His old employer is not responsible for any further rental payments, the employee is responsible for the rental payments.
Should you wish to talk to us about a lease, please complete the online enquiry form or give us a ring on 1300 559 974.