Equipment Finance

Equipment Finance 2018-01-15T05:05:53+00:00

Some of the different types of Equipment Finance available through SD Loans & Leasing are:

A Finance Lease is a rental agreement where we arrange the purchase of the business equipment, truck, excavator or vehicle etc for you via a lender. Then you rent it from the lender at fixed monthly repayment over an agreed period. You might have also heard it called a lease or equipment lease.

There is always a residual value at the end of the term, and most financiers will allow you to release the asset at the end or they will offer to sell the equipment to the client for the residual amount. The equipment must be used predominately for business use, terms generally range from 12 to 60 months, and the interest rate is fixed for the term.

What sorts of business equipment do Finance lease best suit?

  • Cars
  • Trucks and other heavy vehicles
  • Office equipment
  • Forklifts and other industrial equipment
  • Medical equipment
  • Printing equipment
  • Construction equipment and more
  • Industrial equipment
  • Earthmoving equipment

Ownership under Finance Lease

The financier owns the equipment until the final payment, including any residual, is paid. The ownership is then transferred to the Lessee.

Residuals on Finance Lease

There is always a residual value, which is owed to the financier at the end of the term. It is often calculated as a percentage of the original purchase price.

Accounting under Finance Lease

The purchase price under a finance lease is treated as a capital purchase and depreciated over the life of the asset. The interest cost is also treated as an expense. GST is payable with each instalment. Normally lease payments are treated as deductible expenses for businesses.*
*Please refer to your Accountant or Advisor for Tax Advice.

Accounting for a Finance Lease on the Balance Sheet

Both the asset and liability are shown on the balance sheet under a Finance Lease.

Upgrades and Add Ons

Upgrades and add ons generally require another lease and/or payout of the old lease – a penalty may be incurred for this if the residual is not due.

Benefits of a Finance Lease

  • Keep your capital – we pay 100% of the equipment purchase price up front so you don’t tie up your own funds
  • Payments are 100% tax deductable if for business use
  • Depending on your financial position you may have the option to prepay 12 months of payments to reduce your taxable position in a financial year*
  • Easy budgeting with fixed rental payments over the period of the contract
  • Short term contracts usually up to 5 years but can be extended to 7 years
  • You claim the GST back on your monthly payments

*Please refer to your Accountant or Advisor for Tax Advice.

Contact Us Today

Like to find out more about a finance lease for your business equipment?
Call our office on 07 4033 0254 or email us.

A Hire Purchase arrangement is a contract where the financier owns the equipment during the term of the hiring. The hirer pays instalments over the term of the loan, and when the final instalment has been paid, ownership of the equipment passes to the hirer. The equipment must be predominantly for business use, terms generally range from 12 to 60 months, and the interest rate is fixed for the term.
A Commercial Hire Purchase can also be called an offer to hire, hire purchase, asset purchase, CHP or a HP.

What are the benefits of a commercial hire purchase?

  • Deposit or trade options – if it suits you at the start of the contract which will reduce your monthly payments.
  • Flexible structured payments to suit your cash flow – payments monthly, quarterly, half yearly, yearly and seasonally.
  • Easy budgeting – your payments are fixed throughout the contract.
  • GST is not charged on payments.
  • Tax deductions on depreciation and the interest component of the payment.
  • The Hire Purchase contract can have a balloon payment at the end or you can choose to own it at the end.

Ownership under a Hire Purchase

Under a Hire Purchase agreement, the ownership of the goods is transferred to the hirer at the completion of the hire purchase contract. GST is not paid on the instalments, it can be claimed on the initial purchase. Residuals/Balloons on Hire Purchase Agreements

Hire Purchase agreements often contain options for residual or balloon payments at the end of the term which will reduce your monthly repayments during the contract term. At the end of the term when the residual or balloon is due there is an option to refinance it for a further term.

Accounting under Hire Purchase Agreements

The purchase price under a hire purchase contract is treated as a capital purchase and depreciated over the life of the asset. The interest cost is also treated as an expense. GST is accounted for at the start. Under a hire purchase, contract depreciation and interest charges are normally treated as deductible expenses for businesses. GST is usually claimed in full up front, however conditions apply
* Please refer to your Accountant or Advisor for Tax advice.

Both the asset and liability are shown on the balance sheet including GST

Upgrades and Add Ons

Upgrades and add ons generally require another hire purchase agreement and/or payout of the old hire purchase agreement.

Contact Us Today

Like to find out more about a Commercial Hire Purchase agreement for your next piece of equipment?
Call our office on 07 4033 0254 or email us.

Renting is also known as an operating lease. As with a Finance Lease, the financier purchases the equipment required, and then rents the equipment to the client for a series of predetermined rental instalments. No residual is payable, however and at the end of the term you can return the equipment to the financier. Alternatively, if the client wishes to retain the equipment they can make an offer for fair market value to the financier to purchase the equipment. The equipment must be used predominately for business use. Terms generally range from 12 to 60 months, and the interest rate is fixed for the term.

Ownership under Rental

Renting is an operating lease where ownership is not the motivation but where upgrading to new equipment during the term, is easy. If you don’t upgrade, equipment is returned at the end of the term. Alternatively you can make an offer to purchase the equipment. Equipment rentals are popular for every day office equipment such as computers, phones and photocopiers.

Residuals on Operating Lease/Rental

Normally there are no residuals in a rental agreement – it is undisclosed.

Accounting under Operating Lease/Rental

Rental costs are written off in the month they are incurred. Rental costs are normally treated as deductible expenses for businesses* GST is paid with each instalment.
* Please refer to your Accountant or Advisor for Tax Advice.

Rental equipment is not shown on the Balance Sheet and neither are the rental payment liabilities, other than due or overdue payments.

Upgrades and Add Ons

One of the advantages of a rental is easy upgrades and add ons.

Contact Us Today

Like to find out more about equipment rental and leasing?
Call our office on 07 4033 0254 or email us.

A Chattel Mortgage is a loan agreement whereby the customer borrows funds to purchase equipment, and takes ownership of this equipment right from the start. The lender will take a charge over the equipment as their security. The equipment must be used predominantly for business use. Terms generally range from 12 to 60 months, and the interest rate is fixed for the term. Chattel Mortgages can sometimes be called an equipment loan, commercial loan, national commercial loan.

What are the benefits of Chattel Mortgages?

  • Flexibility of having a deposit or trade at the start of your contract to reduce your overall payments
  • Short or long term contract 1-7 years usually
  • Tax advantages – deductions for depreciation of the asset and interest paid
  • Easy budgeting as your payments are fixed so you know what you’re up for each month
  • Balloon or residual payment at the end or reduce your overall payments
  • Structured payments to suit your cash flow such as monthly, quarterly, yearly and seasonal
  • Claim 100% of the GST as a credit on your BAS statement at the purchase of the equipment

What equipment do chattel mortgages best suit?

Chattel Mortgages are ideal for acquiring most forms of business equipment that moves and has a service life of several years such as the following:

  • Manufacturing machinery
  • Cars, trucks and commercial vehicles
  • Computers and IT systems
  • Earthmoving equipment
  • Cranes and construction equipment
  • Boats, aircraft and buses

Ownership under a Chattel Mortgage

Under a Chattel Mortgage the ownership of the goods is with the purchaser/customer from the outset once the invoice is raised and the financier has paid for the goods. The customer makes fixed payments over the term of the contract to repay the goods. There is no GST the instalments.

Residuals/Balloons on a Chattel Mortgage

Chattel Mortgage agreements often contain options for residuals or balloon payments at the end of the term. Taking a balloon payment at the end of the term will reduce the monthly repayment during the contract.

Accounting under Chattel Mortgage

The purchase price under a Chattel Mortgage agreement is treated as a capital purchase and depreciated over the life of the asset. The interest costs are also treated as an expense. GST is included in the purchase price of the goods Under a Chattel Mortgage, depreciation on the goods and interest charges are normally treated as deductible expenses for businesses*. GST is claimed back in full upfront by the customer
* Please refer to your Accountant or Advisor for Tax advice.

Upgrades and Add Ons

Upgrades and add ons generally require another hire purchase agreement and/or the payout of the old Chattel Mortgage agreement.

Contact Us Today

Like to find out more about a chattel mortgage for your business equipment?
Call our office on 07 4033 0254 or email us.

A car loan for business work in a similar way to a Consumer Car Loan where the financier lends money against the security of the car that is being purchased but the loan is claimed via the business.

Generally the contract is for a term of 12 months to 5 year and it can have a residual payment at the end which can be refinanced at the end of the initially contact. The customer takes ownership of the vehicle at the time of purchase and the financier takes a charge over the vehicle to secure the loan.

Once the loan is paid out the customer has clear title of the vehicle.

Benefits of a car loan

  • Flexible contract terms ranging from 12 to 60 months (one to five years.
  • A balloon value can be applied to the contract enabling the monthly or fortnightly repayments to be tailored to a budget.
  • Deposit (either cash or trade-in) may be used.
  • A tax deduction is available when the vehicle is used for business purposes.
  • The loan is secured against the vehicle, allowing lower interest rates.

Who does a Car Loan suit?

A Car Loan is suitable for individuals or businesses who wish to purchase a late model car either privately or from a licensed dealer.

Contact Us Today

Like to apply for a Car Loan today?
Call our office on 07 4033 0254 or email us.

A low doc car loan is a car finance option available to business car loan applicants and for self employed customers. Essentially, you do not need to provide payslips or financial statements to obtain a low doc car loan..

Benefits of a Low Doc Car Loan

  • Quick approval
  • Do not have to provide financial statements or pay slips
  • No need to disclose financial data
  • Able to protect your financial position

Who can apply for a low doc car loan?

Low doc car loans are available for business client subject to meeting the following conditions:

  • Passenger cars or commercial vehicles up to 3 tonnes
  • Maximum loan amount of $70000
  • New and used vehicles up to 4 years old
  • Must be from a licensed dealership
  • ABN for a minimum of 2 years
  • Must have equity in real estate property or have a deposit of 30% towards purchase
  • Clear CRAA report and sound repayment history

Contact Us Today

Looking for low doc finance for your next car?
Call our office on 07 4033 0254 or email us.

What is a novated lease?

  • A novated lease is a three way agreement (“novation agreement”) between an employer, employee and lease company, under which the employee leases a vehicle from the lease company, and employer agrees to take on the Employee’s obligations under the lease.
  • The employer then makes the lease payments on behalf of the employee, and deducts them out of the employee’s
  • Pre-tax income (known as salary packaging a vehicle).
  • If the employee ceases to be employed by that employer, or the lease agreement ends, the employee retains the
  • Vehicle but all obligations assumed by the employer under the novation agreement revert back to the employee.

Benefits for the employee:

  • Potential for significant income tax savings
  • End of lease profit
  • Savings on GST that would normally be incurred on vehicle expenses
  • Access to volume discounts under this scheme
  • More flexibility in the choice of a car compared to a company car arrangement
  • Vehicle stays with the employee and can be transferred to a new employer

Benefits for the employer:

  • A way to provide an effective increase in employees’ salaries with no or minimal cost to the business
  • Potentially a cost effective alternative to operating a fleet of company vehicles
  • The business does not assume any risk for the vehicles
  • The employee vehicles are “off balance sheet”

Fully Maintained novated lease

A Fully Maintained Novated Lease is an arrangement where all of the operating costs of the motor vehicle are included as part of your salary package. Operating costs that can be included:

  • Lease Rental
  • Fuel & Oil
  • Servicing and Maintenance
  • Registration
  • Tyres
  • Insurance
  • Roadside Assistance

The Key Features of a fully Maintained Novated Lease are:

  • Finance 100% of the vehicles value, flexible terms of 1-5 years.
  • Fixed Residual. A residual is set by the lease provider and is calculated using the ATO depreciation guidelines.
  • Package Options. Choose from a complete fully maintained or partly maintained option.
  • Flexible Repayment Options. Repayments can be adjusted immediately if usage or running costs increase or decrease.
  • Flexible Fuel Card. A fuel card that is valid anywhere a Visa Card is accepted.
  • Own account Login. Get your own online account login from anywhere you can access the internet.

Non Maintained Novated Lease

Under a Non-Maintained Novated Lease the lessee is responsible for all maintenance and other running costs of the motor vehicle.

Under a Novated Finance Lease arrangement the client has full use of the vehicle for a specified term in return for monthly repayments. At the conclusion of the term full ownership of the vehicle will pass from the Financier to the client after payment of the residual value.

There are four variables to consider as follows:

  • Amount Financed
  • The Finance Term
  • Interest
  • Residual Value

The Key Features of a Non-Maintained Novated Lease are:

  • No finance payout penalties
  • It’s a tax effective way to lease a vehicle
  • You get total flexibility in choice of vehicle
  • Your vehicle can be used 100% for private use
  • Access to fleet discounts for all new cars
  • Substantial GST savings

Contact Us Today

Like to find out more about a novated lease for your business equipment?
Call our office on 07 4033 0254 or email us.

A fully maintained operating lease is a one payment a month solution which covers all the operating costs of the vehicle including a ‘hand back the keys’ at lease end.

The lease has flexible terms expressed in both terms (number of months) and kilometres travelled. Expiry of the lease can be initiated by either the term or the stipulated kilometres which ever occurs first. There is also some flexibility in the items included in the lease eg; tyres and petrol may be optional.

The Key Features of a Fully Maintained Operating Lease are:

  • Simple vehicle management. One monthly repayment.
  • Reduced administration costs as employees time is free to focus on income producing core business rather than vehicle purchasing, maintenance and administration.
  • Vehicles are kept off balance sheet, to improve debt-equity ratios for future lending. The monthly lease payments are treated as an operating expense for taxation deductions (refer your accountant for personal circumstances).
  • No residual risk resulting in loss on resale of your car. The residual responsibility remains with the fleet provider, not you.
  • Potential fleet savings. Buying power on the vehicle and the servicing costs keeps the monthly payment down.
  • Comprehensive Reporting keeps you informed of vehicle usage, FBT expenses and replacement dates.
  • Emergency break down service.
  • Simple order process.

Contact Us Today

Like to find out more about an operating lease for your business equipment?
Call our office on 07 4033 0254 or email us.

Under a non-maintained operating lease the lessee is responsible for all maintenance and other running costs of the motor vehicle.

The Key Features and benefits of a Non Maintained Operating Lease are:

  • The rental payments are fixed over the term of the lease.
  • The financier assumes the residual value risk on the vehicle.
  • The motor vehicle does not appear on the balance sheet.
  • Operating costs can be included in a single payment

Ownership under an Operating Lease and Rental

Operating Leases and Rental is where ownership of the goods is not the motivation but where upgrading to new equipment during the term is easy. The goods might be needed for a specific job or a specific term. If you don’t upgrade at the end of the term, equipment is returned at the end of the term. Alternatively you can make an offer to purchase the equipment.

Rental repayments on Operating Leases

Normally the residual in a rental agreement it is undisclosed.

Accounting under Operating Lease and Rental

Rental costs are written off in the month they are incurred. Rental costs are normally treated as deductible expenses for businesses.* GST is paid with each instalment.
*Please refer to your Accountant or Advisor for Tax Advice.

Rental equipment and operating leases are not shown on the Balance Sheet and neither are the rental payment liabilities, other than due or overdue payments.

Upgrades and Add Ons

One of the advantages of a rental and operating lease is easy upgrades and add ons.

Benefits of operating leases and rentals

  • Upgrade, add and replace – make changes to your equipment throughout the contract
  • You keep your capital – no deposit required and we pay 100% of the equipment so you don’t need to tie up your funds
  • Short and long term contracts depending on the use for the equipment
  • Easy budgeting – fixed rental and interest so you always know what you’re up for
  • Off balance sheet liabilities and assets
  • Tax advantages – 100% tax deductable when used solely for business

Contact Us Today

Like to find out more about an operating lease for your business equipment?
Call our office on 07 4033 0254 or email us.