Leasing a car for business
See if your business is eligible and the business vehicle leasing options available.
Leasing a car for business is a great option if you're after a business vehicle but don't want to buy it outright.
There are a number of business vehicle leasing options to help get your business on the road.
Find out if your business is eligible, whether car leasing is right for you and compare your options below.
What are my business car leasing options?
There are various leasing options available if you’re looking to lease a car for your business. These include:
- Operating lease. A leasing option that functions like a long-term car rental. Your business does not take ownership of the vehicle, but the lease is considered a tax-deductible business expense. With some operating lease options, you can incorporate the cost of insurance, repairs and other ongoing costs into your lease repayments.
- Finance lease. Under a finance lease, the lender purchases the vehicle and then leases it to your business for an agreed term. You make regular lease repayments and will generally have the option to take ownership of the vehicle at the end of the lease term.
- Fleet management. This is ideal if you already have cars in your business but want assistance with the administration burden and costs. You can outsource your vehicle management and benefit from an easily tracked and monitored way to manage your operating costs. Since you are outsourcing your fleet management, you are likely to benefit from discounts on servicing, repairs and the price of fuel. All vehicle costs are consolidated into one invoice, which reduces the administration burden on your business.
- Commercial hire purchase. Like a finance lease, the lender will purchase the vehicle on behalf of your business and you will make regular repayments to cover the cost of the lease. Your business can claim an input tax credit for the GST contained in the purchase price of the vehicle.
- Novated lease. This is a leasing option available to employees who wish to use their pre-tax income to cover the cost of the car lease. As the business owner, you will need to arrange for payments to be taken directly from the employee's salary.
How much will it cost my business to lease vehicles?
There are a number of different costs associated with various business vehicle leasing options. A fully maintained lease will include the cost of fuel, maintenance, registration and other ongoing costs in your repayments, whereas a non-maintained lease will simply cover the cost of leasing the vehicle. Your costs will also depend on the number, type and age of the vehicle(s) you choose to lease.
However, there are some costs that may apply, regardless of the vehicle leasing option you choose. These include:
- Establishment fees
- Monthly or ongoing service fees
- An account maintenance charge
- Charges for asking to vary the lease terms
- A fee if the lease ends early which will be determined by the car leasing company
- Direct debit dishonour fees
You will also have to cover any ongoing running costs if you opt for a non-maintained lease and this should be factored into the overall cost of your lease.
What features are on offer with business vehicle leasing?
Some of the features offered with business vehicle leasing include:
- Reduced fleet administration costs.
- Access to an online portal. Some car leasing companies offer an online portal so you can easily see fuel usage and servicing of your fleet of cars.
- Peace of mind. If you get a fully maintained lease, you have the peace of mind of knowing that everything from fuel to roadside assistance is covered in the fee you pay each month.
- Employee leasing options. Novated leasing allows employees to lease vehicles using their pre-tax income.
- No requirement to buy the vehicles. As you’re leasing the vehicle, there’s no reason for you to now go out and spend thousands on a fleet of vehicles for your team. You can simply lease them and keep costs down.
- Flexibility of lease. If your employee moves before the lease is finished, the lease of the vehicle follows them to their next job. This means that you don’t have to pay off a vehicle that is no longer benefiting your business as well as dealing with vehicle removal once the lease is up.
- Set kilometre limit. Every business car lease has a yearly kilometre limit. This is agreed upon in advance and is usually about 16,000+ kilometres. This can give you peace of mind as you know that your employees aren’t driving around and racking up the kilometres on an asset for the business. If they do, there’s an additional mileage fee.
Is my business eligible?
Different lease providers will have their own eligibility criteria that your business will need to meet to be eligible for a business vehicle lease. These may include:
- Have an Australian Business Number (ABN).
- Be trading for a minimum period of 24 months.
- Show your current debt and assets situation. This is because there are credit applications that need to be approved before you can start up a leasing agreement with a car leasing company. Good credit is also handy here, as the application will ask you for your credit score as well as your credit history.
- Know the amount you want to borrow, as well as the asset you're looking to finance through a novated lease. To be approved for a novated lease from a business point of view, it's important that you know how much you want to borrow as well as the type of asset you're looking to finance. Entering this into your application shows that you're aware of the amount you want to borrow as well as what type of car you want to provide for your employee.
Have more questions about leasing a car for business?
Do I need a fully maintained or a non-maintained lease?
This is up to you. If you like overseeing repairs and maintenance for your fleet, go for a non-maintained lease. However, if you’re sick of having to look after it all, a fully maintained lease sounds like a better fit.
What’s the residual value risk of leasing a vehicle?
This varies from vehicle to vehicle. This is another term for the remaining value of an asset as it has fully depreciated in value over time.
Are the leases removed off my business balance sheet?
This depends on the car leasing company, but no business wants to own an ageing asset. Many will remove the vehicles from your balance sheet while maintaining the residual value risk themselves.
What other options do I have?
If business car leasing doesn't sound suitable for your business, you can instead finance your business vehicle using a car loan. Compare your options below.
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