What Is A Finance Lease ?

A Finance Lease is a cost-friendly way to pay for a vehicle. But how does it work, and what are its features?

Why lease when you could buy the vehicle outright?

We look to answer these questions for you.

How Does A Finance Lease Work?

The financier (lessor) purchases the vehicle on behalf of the client (lessee). The lessee then rents it from the lessor over an agreed period/term. At the end of the term upon finalisation of the residual value the lessee can claim ownership of the vehicle.

Finance leases can be tax effective arrangements for individuals and businesses and can assist in easing cash flow, and assisting with budget forecasting. PAR Leasing can provide information on how leasing can benefit your situation, but always recommend seeking financial advice before entering into any arrangement.

The finance risk on the lease vehicle sits with the lessee during and at the end of the lease. At the end of the lease term the lessee has the option of:

  • Re-financing the vehicle for a further agreed term
  • Pay-out the residual value and own the vehicle
  • Pay-out the residual value and sell the vehicle

The lessee may also look to sell and replace the vehicle with a new vehicle on lease.


Flexible lease terms

With PAR Leasing our lease terms are flexible, clients can choose to finance a vehicle for anywhere between 12 to 84 months.

Fixed interest rate applies

The interest rate is fixed for the term of the finance lease. So you are not exposed to any fluctuations during the lease term. Which assists with budgeting.

Option to own the vehicle at lease end

Under a finance lease, you are building equity in the vehicle during the lease term, and at the end of that term, you have the option of owning the vehicle, by paying out the residual value on the finance.

Residual Payment

At the end of the lease term the client will be responsible and be required to pay the residual value owed on the finance.

PAR Leasing finances the vehicle

PAR Leasing will provide finance on the entire vehicle, including any options or modifications that are made to the vehicle.

Tax Deductible

Generally lease payments are tax deductible, and will reduce the amount of tax your company pays.

GST Savings

As the financier PAR Leasing claims the GST on the purchase price of the vehicle, which means that the amount financed is GST exclusive.
GST is payable on the monthly lease rentals that you pay to PAR Leasing, but these are claimable as Input Tax Credits by your company.

Strict governance by The Australian Tax Office (ATO)

The ATO sets the guidelines on Finance Lease terms.

Lessee carries the asset risk

The lessee carries the financial risk on the asset during and at the end of the lease term, and is responsible for the discharging of the amount owed on the lease at the end of term.

Leasing vs Buying

Deciding on whether to lease or buy can be daunting, and can be made more confusing by all the jargon that gets thrown around and all the differing options that are available to you and your business.

In simple terms if you buy the vehicle you will either have to finance the whole purchase amount or use cash/equity from your business to do this. When these funds could be used for further growth of your business or for other more important projects.

If you lease the vehicle, you are just paying merely for its use during the term, which helps with managing cash flow, and budgeting.

At the end of the lease you will have options available depending on the lease type entered into.

With a finance lease you will have the responsibility of the residual value payment due at the lease end.

Is a Finance Lease right for me?

This all comes down to your circumstances and what you are planning on using the vehicle for and what the plans for the vehicle maybe at the end of the term.

PAR Leasing are here to help you with this, and can provide you with information and recommendations on what maybe the best for you and your business.

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