The difference between a novated lease and hire purchase
We’ll help you make the right choice for the road ahead
At Aussie, we’re experienced in both – so we’ll help you understand your options, and make the right choice for your business.
What is a novated lease?
It’s a three-way agreement between you, your employee, and a lender – and a popular way for businesses to engage in vehicle financing.
Under the agreement, your business makes regular payments to the lender, while taking out an agreed amount from your employees pre-tax salary. These payments cover things like running costs, maintenance, and purchase price.
Your employee gets to choose the vehicle, and will take care of its management and administration, as well as ownership at the end of the term.
What is a commercial hire purchase (CHP)?
A CHP agreement is between your business and a lender. Basically, a lender buys a vehicle or equipment, and hires it to you for a set term. This can be a great option for businesses who have some GST liability, with possible savings through tax deductions.
At Aussie, we can help you set up a personalised plan, with terms up to five years, as well as adjustable up-front deposits or balloon payments.
So what’s better for my business?
To make things simpler, we’ve come up with a few key questions to ask yourself, including:
- Will the vehicle be for business use only?
- Will the vehicle be considered an asset?
- Who will be responsible for maintaining the vehicle?
- Is the choice of vehicle important?
Knowing the answers to these will help find the right solution. For example, if the vehicle is going to be used only for business, a CHP or a chattel mortgage could be the way to go – as your employee won’t be able to use it for personal travel. On the other hand, if you’re looking to offer salary incentives to your employees, a novated lease might be the best option.
You should also discuss the options with your accountant or tax expert to ensure you find the right outcome, that suits all areas of your business.
Want to know more?
The good news is that talking to Aussie won’t cost you a cent. So if you’re thinking about a small business line of credit, or you’d like more information, contact us on 1300 44 55 66 or enquire online today.