Financing

Consumer Car Loan

 

A consumer vehicle loan is suitable when the vehicle is used wholly or predominantly for private purposes. This means that the vehicle is used privately for more than 50% of the time. The motor vehicle is the only security needed, although in some circumstances a guarantee may also be required. The loan term and balloon payment can be tailored to suit individual circumstances.

Chattel Mortgage

 

Under a chattel mortgage arrangement the customer takes ownership of the vehicle (chattel) at the time of purchase and the financier takes a mortgage over the vehicle as security for the loan. Once the contract is completed, the mortgage is removed giving the customer clear title to the vehicle. A Chattel Mortgage is suited for: companies, partnerships and sole traders who use the cash method of accounting (they record business income and expenses as and when they occur) as it allows them to claim the GST in the vehicle’s price up-front.
Chattel mortgage in a snapshot:

 

  • Vehicle is owned by the borrower
  • Can be 100% funded or deposit (either cash or trade-in) may be used
  • Balloon (residual) payment can be included
  • Tax deduction is generally the interest on the facility and depreciation
  • If registered for GST, the GST on the purchase price can usually be claimed
  • Ability to structure your repayments to suit cash-flow trends

Finance Lease

 

Under a Finance Lease agreement the financier purchases the vehicle on behalf of the customer, the customer then leases the vehicle back from the financier and pays a fixed monthly lease rental for the term of the lease. A Finance Lease is suited for companies, partnerships, sole traders and individuals where the leased vehicle is used for income producing purposes.

Finance lease in a snapshot:

 

  • Vehicle is owned by the financier
  • 100% funding, no deposit or trade in allowed
  • Residual value based on tax guidelines
  • Repayments are generally tax deductible in full
  • Whilst there is no guarantee of ownership, the usual case is the financier will offer for sale at the end of the term the vehicle at the residual value. (In this case there will be an option to trade in or refinance)

Commercial Hire Purchase

 

Under a Commercial Hire Purchase arrangement the financier agrees to purchase the equipment on behalf of the customer, and then hire it back to them over a set period of time for a fixed monthly repayment. The customer has the use of the business equipment for the term of the contract but does not own it. At the end of the contract term when the total price of the equipment (minus any residual) and the interest charges have been paid in full, the customer takes ownership of the equipment. A Commercial Hire Purchase is suited for some individual borrowers who use their vehicle for business purposes and companies, partnerships and sole traders.  

Commercial hire purchase in a snapshot:

 

  • Equipment is owned by the financier but is transferred to the hirer at the end of the term
  • Can be 100% funded or deposit (either cash or trade-in) may be used
  • Balloon (residual) payment can be included
  • Tax deduction is generally the interest on the facility and depreciation
  • If registered for GST, the GST on the purchase price can usually be claimed
  • Depending on which accounting method (cash or accrual) is used, this will affect how the GST can be claimed. We also recommend that independent accounting advice should be sort.
  • Ability to structure your repayments to suit cash-flow trends

Novated Lease

 

A novated lease is a three way agreement between an employer, employee and a lender. The employer, employee and financier sign a novation agreement whereby the employer agrees to take on the employee’s obligations under the lease. Under this arrangement, the employer makes the monthly lease payments on behalf of the employee. Should the employee leave his or her employment for any reason, the novation agreement ceases and the obligations assumed by the employer revert to the employee as the registration is in the employee’s name. A Novated Lease will suit any employee who wants to include a motor vehicle as part of their salary package, so long as their employer offers salary packaging as an option for employees.

Disclaimer: Please note that you should always refer to your accountant or a registered tax agent before taking out finance; this advice is general advice only as we are not aware of your personal circumstances. While we make every attempt to give you the best possible product information, UMF its agents, employees and accredited lenders will accept no responsibility for any loss that may arise.

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