A Guide To Vehicle Finance
Wed, Oct 26 2005

When buying a vehicle for business use you not only have to decide on the type of vehicle, but also the best way to acquire it.

Paying Cash

You are not subject to any financing costs such as interest and establishment fees. The downside is you have spent your cash and cannot use it for anything else eg. working capital, purchasing stock or to offset cash flow.

Hire Purchase

You hire the vehicle over a set period of time (usually a maximum of 5 years) from the financier. Once the final payment has been made the ownership of the vehicle transfers to you. You also have an option as to whether a balloon payment is required or not (to meet cash flow requirements). Interest and Depreciation are tax deductible provided you use the vehicle to generate assessable income.

Lease

You rent the vehicle from the financier over a set period of time. At the end of the term you have the opportunity to own the vehicle by paying out or refinancing the residual. If the vehicle is used to generate income then the lease payments are tax deductible.

Chattel Mortgage

This is similar to a Hire Purchase however if you are registered for GST you may be able to claim the GST (on the vehicle) in full on your next BAS lodgment.

For further information, please contact our vehicle finance expert, Debbie Lyon, on 03 9762 4777

We do not purport to provide taxation or legal advice and strongly recommend that you consult your financial or taxation adviser for specific advice.