Finance Lease

Last updated 01 Mar 2019
In a finance lease or car lease, the lender purchases and asset, such as a car, and allows you to use the asset against a monthly payment (and possibly a deposit).

You are often given the option to purchase the asset at the end of the lease term but you are under no obligation to do so. Signing a finance lease gives you the benefit of use of the asset, equipment or car for low monthly payments and no initial payment.

You can choose the term of your lease, choose whether or not to purchase the asset at the end of the lease and you have no responsibility for disposing of the asset once the lease term is over should you choose to return it.
Key Features
Loan Size
$10k to $2m
Loan Term
1 to 5 years
Interest rate
5% - 10%
Approval Speed
Fast / Medium
Common Uses of Finance Leases
Businesses often use finance leases to finance the use of a car or vehicle for commercial use.
Finance leases are a good option if you are unsure about your company's future needs or outlook.
The GST paid on rental and other charges may be eligible for tax credits.
Keep in Mind
You do not own the asset and will need to either purchase it, replace it with a new lease or purchase another asset at the end of the lease term.
Non-payment of the monthly finance fee will result in the owner seizing it which may be very disruptive to your business.
The lessee will retain the right to claim the depreciation of the asset but you as the hirer can claim the entire lease payment as an expense for tax purposes.
Who Qualifies for a Finance Lease?
Most businesses will qualify for a finance lease as long as you can show that your business' cash flows will allow you to pay the finance fee.
As the piece of equipment will act as collateral, a finance lease is a good option for companies with a weaker credit rating.
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