Vehicle & equipment leasing

Finance Lease – How does it work?

Finance lease is an alternative way for clients to fund asset purchases required for their business. Primarily, the business hires the required equipment for an agreed period and rental with an end or residual value. The residual amount is payable on the expiry date of the lease term to acquire full ownership of the equipment. This residual or future value is agreed between the financier (lessor) and the operator (lessee) at the commencement of the finance arrangement.

The lease payments pay the lease down to the residual value (which is guaranteed by the lessee). Lease payments are usually paid monthly in advance and can be tailored to suit the individual business. The leased asset is reflected on the balance sheet of the business as is the lease liability.

Lease payments for equipment used to generate income are fully tax deductible. The business owner remains responsible for maintaining and insuring the equipment for the life of the asset.

Finance lease – key benefits:

  • Fixed rental payments for contract term.
  • Ability to structure repayment term to the estimated life of the asset.
  • No capital expenditure restraints.
  • First rental is usually the only initial outlay.
  • Rentals are fully tax deductible.
  • Reduced risk of financial loss due to technological obsolescence.

Hire Purchase –  how does it work?

Hire Purchase is also known as Commercial Loan, Asset Purchase, Commercial Hire Purchase or Lease Purchase. Hire Purchase is a lending facility whereby the business owner obtains the required equipment in return for fixed monthly repayments.

Ownership of the equipment is transferred automatically to the business once the final repayment is received by the financier. Hire Purchase facilities are also recorded on the Balance Sheet of the business and for accounting purposes; the business is treated as the owner and can claim the depreciation and interest in their deductions. The Interest rate is fixed for the term of the Hire Purchase Agreement.

Deposits at the commencement of the agreement can be offered in the form of both cash and/or equipment trade-ins.

Hire Purchase – key benefits:

  • A large (balloon) payment can be structured at the end of the agreement to lower the monthly repayments.
  • 100% of financing for terms up to five (5) years.
  • Equity is built in equipment with each payment.
  • Depreciation and interest is fully tax deductible.
  • Ownership is guaranteed at the end of the agreement.

Operating Lease (Rental) How does it work?

Funding arrangement where the applicant pays an agreed rental to use the equipment without any obligation to purchase. At the end of the agreement the equipment is simply returned to the financier (subject to the condition of the equipment), the operator is not responsible for the residual value. An operating lease is an off-balance sheet for accounting purposes.

Operating lease – key benefits

  • Reduced risk of financial loss due to technological obsolescence.
  • Payments are fully tax deductible.
  • For Government bodies, repayments are treated as operating expenditure and not included in capital expenditure budgets.
  • Operator has no risk for the resale of equipment; however, equipment can be purchased subject to negotiations. Payments are fixed for the term of the agreement.
  • Maintenance and availability contracts can also be included.

*Please Note: We strongly recommend for all applicants to consult their Accountant for advice on how to structure their funding requirements to best suit your business and financial needs.


Direct Credit Home Loans
1800 000 800 Australian Credit License Number 392727