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Product Information
Finance Lease
Under a lease agreement, your client (the lessee) has the use of the property for a specified period, in return for a series of payments that can be fixed or structured.
The person who grants the lease (the lessor) remains the owner of the property. There is always a residual value included in the lease contract. This final amount must be paid out at the end of the contract period before ownership can be transferred to the lessee. With a Finance Lease the monthly rental is calculated on the net purchase price and GST is calculated on your monthly repayment. A typical lease structure has a term of 2 - 5 years.
This facility is ideal when financing Motor Vehicles, Trucks, Plant and Equipment.
Fleet Leasing
If a company wants to purchase a fleet of motor vehicles we can arrange a Master Lease Facility or a Fleet Management Package.
This facility is ideal for the business or company who need to purchase a number of vehicles for their staff or operations. This is the most cost effective way to manage many vehicles and payments under one umbrella. Fleet Leasing is ideal for Government Departments, corporations and transport companies.
Novated Lease
An employee leases a motor vehicle from the financier using a standard finance agreement. A Deed of Novation is then entered into between the employee, the employer and the financier under which the employees obligation to pay the lease rental under the finance lease is transferred to the employer for the term of the Deed of Novation. Therefore, the employer pays the lease rental to the financier. The amount of the lease payment will be deducted from the employees pre-tax salary as part of the employees salary package.
If the employee leaves the employers employment for whatever reason the Deed of Novation terminates immediately and the employer no longer has an obligation to pay the lease rental. The obligation to pay the lease rental under the finance lease reverts to the employee. The employee retains use of the vehicle as lessee until the finance lease expires.
Upon ceasing employment with the employer, an employee has the following options in relation to the motor vehicle:
- Continued standard lease payments to the financier, or the employee may be able to transfer the novated lease to a new employer.
- Once the Deed of Novation has been entered into, the employer is the lessee of the motor vehicle and provides it to the employee as a salary package benefit.
- The novated motor vehicle lease gives the employee the flexibility and choice normally enjoyed by a vehicle lessee under a standard lease. The vehicle is registered and insured in the employees name and the employee will pay the running costs associated with the vehicle from their salary package on a tax-exempt basis.
- Payment of the residual value is the responsibility of the employee.
Equipment Finance
We can finance most commercial & industrial equipment and fit-outs.
The following are examples but not limited to:
- Motor vehicles
- Trucks
- Computers
- Photocopiers
- Printers
- Factory/office fit-outs
- Signs
- Telephone systems
- Gaming machines
- Medical equipment
- Forklifts
- Coffee machines
- Cranes
- Office furniture
- Luxury boats
- Aircraft
- Sandblasting equipment
- Sweeping machines
- Warehouse racking
- Recycling units
- Waste disposals trucks
- All plant and equipment
- All vending machines
Consumer Loan
This finance facility is for personal use only. This is a consumer based personal loan where the goods are the security for the loan. This facility falls under the consumer credit code. The interest rate and brokerage are disclosed on the contract. All consumer credit conditions apply to this loan.
This facility can be structured similar to the Commercial Hire Purchase facility. The term is usually 2-5 years and a balloon amount can also be negotiated with the lender.
This loan is ideal when purchasing a motor vehicle or boat.
Commercial Hire Purchase
A Commercial Hire Purchase is a legal obligation between the finance provider and the hirer (the client) where the amount repayable is calculated on a fixed term and fixed rate with the option of a balloon payment.
The basic premise is that the full term must run otherwise penalties may be incurred. When you wish to own the asset from the outset, this type of purchasing finance is an alternative to leasing. A typical Commercial Hire Purchase structure has a term of 2-5 years with payments made monthly although other options are available.
You have a choice of a balloon payment depending on usage and depreciation of goods. With a Commercial Hire Purchase the GST can be financed over the term or paid up front. This facility is ideal when financing Motor Vehicles, Medical Equipment, Luxury Boats and Office Equipment.
Rental/Operating Lease
Rental is designed to accommodate changes and additions. Finance Leasing and Hire Purchase methods were not designed to cope with accelerating technology. They do not allow for any upgrade of equipment and can leave you with a residual value at the end.
Rental is ideal for technology based equipment, for example: computers, photocopiers, communication equipment, office, medical, scientific and plant equipment.
Rental gives you all the benefits of the equipment without the risks of ownership. At the end of the rental period, the equipment can be handed back with no obligation or purchased at an agreed value.
Implementing a Rental solution means your money is invested where it works best and not tied up in rapidly depreciating assets with little resale value. Why commit vital working capital up front on equipment that may rapidly become obsolete. Payments can be fixed so you can easily forecast and change your rentals to match your changing budget.
You also maintain the flexibility to swap your equipment and still keep the ease of one known payment, for a known term, generating a known cash flow.
Rental/Operating Lease offers:
Off balance sheet accounting as payments are treated as a tax-deductible expense item on your Profit & Loss accounts.
No additional security is generally required other than the equipment being purchased.
An extremely flexible finance option where you can add, delete or vary the contract during the term.
Rentals are an expense item, which could improve a Company's position when they need to borrow.
Master Rental Agreement
A Master Rental Agreement is highly recommended for small to large businesses and government departments. Master Rental Agreements allocate the funding necessary for current and future equipment rentals, removing the need for additional contracts, providing the client with access to multiple draw downs over the period of the agreement. Each draw down requires a rental schedule to be produced and signed by the authorised signatory. Rentals are not available to finance motor vehicles. They are also not available to individuals for personal use.
Chattel Mortgage
A Commercial Loan Agreement is where a first registered Bill of Sale/Chattel Mortgage is granted by the borrower in favour of the lender. Normally the total Stamp Duty is payable up front. This facility is ideal for clients who operate their accounts on a cash basis and wish to claim the GST up front as input tax credit.
This facility can be structured similar to a Commercial Hire Purchase facility. The term is usually 2-5 years and a balloon amount can also be structured into the loan depending on usage and depreciation of goods. This facility is ideal when financing motor vehicles.
General Product Information
Term of loan
This is the length of time your loan will run over and is what the rate is calculated over. It is usually between 12 months and 72 months. This will need to be assessed and approved by the lender as the term is decided by the type and usage of goods. Most contracts are for a fixed term only.
Balloon/Residual
This is the amount payable at the end of the Commercial Hire Purchase or Finance Lease term. This balloon or residual needs to be approved by our lenders but varies generally from nil to 50% depending on goods, usage and the term of loan. Residuals are also regulated by taxation guidelines.
Repayments
Monthly repayments are made up of principal & interest payments and are usually paid in advance. Payments in arrears can be structured on a Commercial Hire Purchase facility.
Interest Rates
Leasing rates are formulated using Commercial Bank Bills/Swap rates and are not generally affected when there is a Reserve Bank rate movement. Leasing rates are always fixed. Rates can decrease or increase as market competition dictates.
GST on contracts
When purchasing equipment or a vehicle for business purpose. GST can be financed or paid up front. If financed over the term, GST may be claimed quarterly as an input tax credit, or it may be claimed in total in the following quarter. This will be subject to the finance type. Please visit the ATO at www.ato.gov.au for further information on the GST and any other taxation issues.
Suppliers
You can purchase vehicles and equipment from anywhere in Australia. Motor vehicle dealers must have a dealer number. Equipment suppliers must be a registered supplier.
Private Sale for Motor Vehicles
We are able to arrange finance for clients purchasing a vehicle from a private individual (not from a motor dealer). Private sale transactions are generally more complex than purchasing through a dealer because we are limited to the lenders that will consider this type of transaction. Various conditions include the paperwork that the vendor has to complete and consider, the Statutory Declaration the vendor is required to sign, the documents which usually needs to be witnessed by a Justice of the Peace, and the vehicle inspection by an independent third party.
Disclaimer: DDCL has made every effort to ensure that the material contained on this page is factually correct as at 20th August 2004. However, DDCL does not purport to provide taxation or legal advice and recommends that you consult your financial or taxation adviser for specific advice suited to your own circumstances. DDCL shall not be liable for loss or damage sustained by person acting in reliance of this material.