A few days ago, The Adviser  published an article detailing the advantages for  finance brokers in diversifying into the area of vehicle and equipment finance. Sales managers of top leasing firms have hailed the benefits of extending in to transport vehicle finance on account of the booming field, which is expected to improve dramatically in the new year. So what is all the hype about, and what exactly does vehicle and equipment finance entail?

equipment finance

Equipment finance can generally be separated in to two categories – lease and non-lease.

Lease

A lease is an arrangement in which the financier purchases goods on behalf of a business. The financier, or lessor, rents the product to the business for a certain period of time or until a certain amount of rental payments are paid off.

One of the major forms of lease in terms of equipment finance is hire purchase. In a hire purchase, the lessor purchases the equipment on behalf of the business  and hires it back to them over a set amount of time. Initially, the customer is not the owner of the car, however, after all the payments are made in full ownership transfers to them.

There are also a number of other types of lease in equipment finance. A finance lease stipulates a lessee can enjoy use and ownership benefits of a vehicle or equipment without retaining actual ownership. A novated lease is an agreement between an employer, employee and financier in which the obligation to meet the repayments rests with the employer via a salary sacrifice package. Lastly, an operating lease acts as a rather straightforward rental agreement with no issues of ownership. This is the best option for business with a high turn over of equipment.

Non-Lease

The main reason for signing a non-lease equipment finance transaction is so that the owner of the goods is treated as the owner of the goods for tax purposes. Under a chattel mortgage agreement, the customer (lessee) takes ownership of the equipment at the time of purchase. The interest component of the payment is considered an expense for business income as opposed to lease agreements whereby the entire rental amount is treated as an expense. Rather than claiming back GST over the full term of the contract, a chattel mortgage allows the lessee to claim the expense in one hit.

Benefits of Vehicle and Equipment Financevehicle-finance

Although the benefits of seeking a business equipment financing broker in Perth is pretty straightforward, there may also be other advantages you hadn’t considered. For a business, leasing or mortgaging a vehicle is primarily a great idea because it allows you to put funds into an alternate pathway such as stocks or other things that will go directly back into growing the business. Buying stock is not only more profitable than equipment, it also ensure you don’t spend all your funds on a depreciating asset.

Other merits in equipment finance include cash flow advantages, tax advantages and the ability to acquire a vehicle more suited to the exact purpose of its job. If you’re still unsure of the value or intricacies of vehicle and equipment finance, contact PTR Asset for a quote or more information. 

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