Commercial Hire Purchase
Commercial Hire Purchase, is a type of Finance Lease where the customer can obtain the vehicle by hiring it for a set period of time and a fixed repayment. The vehicle Ownership is transferred to the customer once the final payment is received by the financier.
Commercial Hire Purchase work how does it work?
Commercial Hire Purchase is a flexible business finance product where the financier agrees to purchase the vehicle on behalf of the customer, and then hires it back to them over a set term. The customer does not own the vehicle but has full use of the vehicle for the whole term of the agreement.
The transfer of title to the customer for the vehicle is completed when the final payment has been made.
Benefits of Commercial Hire Purchase
- Flexible contract terms ranging from 24 to 60 months
- A Residual Value amount, also known as a Balloon Amount, is available on Commercial Hire Purchase
- Fixed Interest Rates
- Repayments are fixed for life of the agreement - no interest rate volatility
- Costs are known in advance - cash flow planning & budgeting
- A Deposit can be used (cash or trade in)
- A tax deduction for Interest & Depreciation can be claimed where the vehicle is predominately used for business purposes.
- GST is not charged on the monthly rental payment or the residual value.
- If registered for GST, the customer can claim the GST component of the vehicle purchase price.
- Lower Interest Rates as teh finance is secured against the vehicle.
Who does a Commercial Hire Purchase suit?
A Commercial Hire Purchase is ideally suited for Companies, Partnerships and Sole Traders who account for GST on a Accruals basis. (Your BAS Statement shows which basis you account for GST). It is also suited to individuals who use their vehicle predominately for business purposes.
What are the tax implications of a Commercial Hire Purchase?
Companies, Partnerships & Sole Traders who use the accrual method for accounting can claim the GST component of the vehicle purchase price as a lump sum on the next BAS Statement, whereas those entities using the cash method of accounting claim the GST as equal installments over the term of the agreement.
GST is not charged on the monthly repayments or the residual amount (balloon amount) if applicable.
Where the vehicle is used predominately for business purposes, the hirer can claim interest component of the lease payments and depreciation up to the luxury car tax threshold or depreciation limit of $57,123.
Commercial Hire Purchase commitments are noted on an entities Balance Sheet as capital expenditure.
What other options are available other than a Commercial Hire Purchase?
There are other business car loan & business car finance products that you may wish to consider such as:
Want more information?
If you would like to know more about Commercial Hire Purchase or any of our other Business Car Loan & Business Car Finance products call us on 1300 361 360 and one of our experienced Finance Consultants will provide you with the right solution for your needs.
You can also Apply Online and one of our Finance Consultants will call you back shortly.