Business Finance

Chattel

Commercial hire

Finance Lease

Operating Lease

Rent To Own

Chattel

What is a Chattel Mortgage?

Now days probably the most common form of asset and equipment finance (for businesses), a chattel mortgage is essentially a mortgage over goods to be financed. Chattel mortgage is classed as a cash sale in that the goods automatically become your property on purchase and the finance company takes a mortgage over the chattels (assets).

Tax & GST:

Under a chattel mortgage a client may claim depreciation, running costs and the portion of the repayment attributable to business use. The chattel mortgage allows businesses to claim the full input tax credit from GST incurred expenses immediately (next BAS statement). GST is charged on the purchase price of the asset but not on the monthly rental or residual payment.

Cost of Finance:

Generally Chattels are the most competitive when it comes to interest rates against the finance.
There is however an additional cost of stamp duty which is paid against the total amount financed.

CoverU can provide you access to the most competitive chattel mortgages available with:

  • Flexible contract terms ranging from 12 to 60 months
  • Tailored monthly payment to suit your budgets
  • Flexible residual values (balloon)
  • Fixed interest rates
  • Fixed repayments for the term of the contract
  • Deposits through cash or trade in welcome
  • Claim tax deductions for 100% of the business use of the vehicle
  • Claim GST on the purchase price of the vehicle
  • Claim depreciation on the vehicle
  • No GST is charged on the monthly repayment or the contract balloon amount
  • Secured finance allowing for cheaper interest rates

Contact CoverU today to see how much we can save you!

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Commercial hire purchase

What is a Hire Purchase?

Hire purchase finance is an agreement between you and the lender to acquire an asset for your business. During the hire period, the financier legally owns the asset and you pay regular instalments to the finance company for the use of the vehicle.

Tax and GST:

Under a HP you can claim depreciation, running costs and interest paid apportioned to the amount of business use. GST is payable on the purchase price of the vehicle, all repayments/ charges and any fees. These GST charges are payable at settlement of the contract, and may be financed on top of the loan or paid upfront.

Cost of Finance:

Typically similar if not the same as chattel.

CoverU can provide you access to the most competitive CHP’s available with:

  • Flexible contract terms ranging from 12 to 60 months
  • Tailored monthly payment to suit your budgets
  • Flexible residual values (balloon)
  • Fixed interest rates
  • Fixed repayments for the term of the contract
  • Deposits through cash or trade in welcome
  • Claim tax deductions for 100% of the business use of the vehicle
  • Claim GST on the purchase price of the vehicle
  • Claim depreciation on the vehicle
  • No GST is charged on the monthly repayment or the contract balloon amount
  • Secured finance allowing for cheaper interest rates

Contact CoverU today to see how much we can save you!

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Finance Lease

What is a Finance Lease?

A Finance Lease is typically where a client leases a piece of equipment and the financier or lessor transfers the risk of ownership to the customer without transferring legal ownership. The lessee makes fixed interest repayments over the term of the lease and then takes ownership at the end by paying and agreed amount. This amount usually mirrors the set residual or balloon value. Ownership is never passed to the customer until the financier or lessor accepts the final repayment as an agreed purchase.
Residual values are typically set by the Australian Tax Office and have a minimum and maximum for each lease term, customers can specify their actual residual value within this range.

At the end of the finance lease, the customer may choose to extend the lease for an additional term; refinance the residual value or offer to purchase as mentioned above. This is all subject to agreement from the financier or lessor.

Tax and GST:

Tax and GST benefits will vary depending on the type of arrangements the finance lease is under. In some case such as novated leasing there may be additional benefits for passing the lease onto employees (salary packaging). Generally for lessee’s tax benefits include the ability to claim 100% of the business use as a business cost but similarly to an operating lease there is no depreciation that can be claimed. GST is charged on the monthly lease rental and the residual value and can be claimed as an Input Tax Credit if used for business purposes.

Cost of Finance:

Similarly to an operating lease they are usually a little more expensive than traditional forms of finance. Recent times have seen this gap contract significantly.

Some clients like to trade the vehicle and CoverU can provide access to a great range of finance leases with

  • Flexible contract terms ranging from 12 to 60 months
  • Fixed interest rates
  • Fixed monthly lease rentals for the term of the contract
  • GST paid and claimed by financier lowering your amount financed
  • Tax deductions for applicable business use
  • Secured finance allowing for cheaper interest rates

Contact CoverU today to see how much we can save you!

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Operating Lease

What is an Operating Lease?

An operating lease or Rental as they are sometimes called is a contract that allows for the use of an asset, but does not convey rights of ownership of the asset. An operating lease is not capitalised; it is accounted for as a rental expense in what is known as “off balance sheet financing”. In some cases you may make an offer to purchase the asset at the end of the lease but this is entirely at the discretion of the financier or lease provider.
Operating leases are typically used against assets with limited life spans such as computers, medical equipment and most other smaller equipment or machinery. They are also very popular for companies running large fleets of motor vehicles. This is a very good way to keep your equipment up to date without having to hold any residual liability.
In the case of motor vehicles you can have what is called a fully maintained operating lease that includes in the rental agreed services or running costs for the vehicle.

Tax and GST:

There are some tax advantages for taking out an operating lease such as claiming 100% of the repayments against business use but the leases have no claim against depreciation of the asset or purchase GST. GST is charged on the monthly lease rental and the residual value and can be claimed as an Input Tax Credit if used for business purposes.
By leasing a vehicle this way the financier or lessor is responsible for payment of the GST on the purchase price of the item meaning a lower initial finance amount and the customer only pays GST on the residual or agreed amount payable to purchase the vehicle at the end of the term.

Cost of Finance:

Operating leases are usually a little more expensive than traditional forms of finance due to the fact the financier or lease provider takes on the entire residual risk for sale of the asset when it is handed back.
Note: There are typically fair wear and tear guidelines with an operating lease.

The benefits of a CoverU operating lease can include:

  • Access to fleet discounts Australia wide
  • Amount financed being GST exclusive
  • A consolidated monthly invoice allowing for easy budgeting
  • Lease rentals, normally fully tax deductible (except Luxury Vehicles) are expensed at the same rate in the profit and loss account and cash flows
  • No liability as asset is not shown on the balance sheet
  • Maintenance, tyres, registration and other running costs can be built into the rental to provide customers with a known fixed expense for varied terms and kilometres.
  • No residual risk at lease end
  • Clear fair wear and tear guidelines
  • Assisted vehicle polices for drivers and employees
  • Included roadside assistance

Contact CoverU today to see how much we can save you!

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Rent To Own

What is Rent To Own?

This product offers an alternative to traditional options such as equipment leases and gets you the equipment you want today.
Typically used when standard financiers can’t or won’t approve your finance due to lack of trading figures or even a previous credit issue.
Small business or even start up businesses can sometimes have trouble accessing the finance they need and this provides them with a quick affordable option. Normally only 12 months it can also be useful when you only need equipment for a short period of time.. General rule of thumb is it should be income producing equipment. e.g. A truck for a new haulage company or a new ute for a plumber.

Tax and GST:

Simply classed as a rental, the repayments are 100% tax deductable for the attributed business use. There is no GST on the purchase price as you don’t own the asset but you can claim GST on the rentals. The asset can be handed back after 12 months or purchased for the agreed residual value

Cost of Finance:

The true cost is affordability and achieving what you need. The rentals are typically more expensive than traditional finance but when you weigh up against the fact you are not able to obtain any other finance it can be short term pain for long term gain. With the applicable tax deductions the difference may not be as much as you think and its a great way for new businesses to establish a repayment history making it easier to obtain finance at the end of the rental period.

The benefits of Rent To Own include:

  • An easy to manage short term rental
  • Set weekly repayments
  • Lease rentals can be fully tax deductible
  • Standard rental so no need to manage depreciation etc
  • Can be used for almost anything over $10,000 dollars.
  • No residual risk
  • Clear fair wear and tear guidelines
  • Ability to use rentals as proof of repayment history increasing your chance for standard finance at the end of the rental period

Contact CoverU today to see how we can help you get what you need!

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