A Car Lease or Finance Lease is a commercial finance product which enables the customer to have the use of a car or commercial vehicle and the benefits of ownership, while the financier retains actual ownership of the vehicle.
The financier purchases the vehicle on your behalf, and you then lease the vehicle back from the financier and pay a fixed monthly lease rental for the term of the lease.
At the end of the lease you can either pay a residual value (final instalment) on the lease and take ownership of the car, trade it in or refinance the residual and continue the lease.
Car Leasing is suitable for companies, partnerships, sole traders and individuals where the leased vehicle is used for income producing purposes. It is also ideal for employees who want to salary package a vehicle through a Novated Lease as part of their remuneration.
A Chattel Mortgage is a commercial finance product where the customer takes ownership of the vehicle (chattel) at the time of purchase.
Under a Chattel Mortgage the financier advances funds to the customer to purchase a vehicle (usually directly to the car dealer), and the customer takes ownership of the vehicle (chattel) at the time of purchase.
The financier then takes a “mortgage” over the vehicle as security for the loan, by registering their interest over it with the PPSR.
Once the contract is completed, the security interest is removed giving the customer clear title to the vehicle.
A Chattel Mortgage is suitable for those companies, partnerships and sole traders who use the “cash method” of accounting (they record business income and expenses as and when they occur) as it allows them to claim the GST in the vehicle’s price up-front – ie. in the very next BAS.
Personal Loan / Car Loan
A Car Loan is a personal finance product where the financier lends the customer funds for the purchase of a vehicle, and secures the loan against that vehicle.
A Car Loan is can also be known as a Consumer Loan or a Secured Car Loan.
Under a Car Loan the financier advances funds to the customer to purchase a car. The customer takes ownership of the vehicle at the time of purchase, and the financier takes an interest in the vehicle as security for the loan.
Once the contract is completed, the financier lifts their interest in the vehicle, giving the customer clear title.
A Car Loan is suitable for individuals who wish to purchase a late model car and do not have significant business use of their vehicle or the option of novated leasing (salary packaging).
Novated Leasing is a method of salary packaging a car, under which an employee leases a car and the employer agrees to take on the employee’s obligations under the lease, paying the monthly lease rentals from the employee’s pre-tax income (“salary sacrificing” this income). If employment ceases for any reason, or the lease agreement is finalised, the Novation ceases and the obligations assumed by the employer revert back to the employee.
A Novated Lease will suit any employee who wants to include a motor vehicle as part of their salary package, so long as their employer offers salary packaging as an option for employees.