A finance lease is a rental agreement whereby you lease/rent an asset for an agreed period and paying an agreed monthly rental amount. This type of contract needs to have a residual value which is set upfront to reflect the projected asset’s value at the end of the term. The balloon/residual on a finance lease is set using ATO asset guidelines, and is accounted for on the balance sheet of the borrower.
Under the general terms and conditions of most finance leases, you have no option or right to purchase the asset. Nonetheless, with most lenders will allow you to to buy the equipment or asset at the end of the term for the residual value. Alternately, you may trade it in on a replacement, return it to the financier paying the difference between the residual and market value (residual risk) or even extend the lease for a further term.
This type of contract is NOT/NON interest based, but rather based on a rental payment agreement. Hence it is fair to say this type of contract is a fixed rental contract rather than a loan contract.
Do I need to be self employed to take out a Finance lease?
You will need to be self employed to take out a finance lease contract. This type of contract is not available for personal but is rather used for business purpose.
Do I need to own a property to take out this type of contract?
You do NOT need to own any property to take out a finance lease. However if you did own a property, a financier will consider that more favorable.
Are these types of contract more expensive?
No they are priced similar to other types of equipment finance contracts.
Do all financiers offer these types of contracts?
These types of contracts can be found with a certain number of financiers
Newly self employed, can I apply for a Finance Rental contract?
Yes, we have lenders who can structure this contract even if you are newly self employed within the last 1 month.