Also called: Lease
Finance lease
A finance lease is an arrangement where the financier buys the asset and leases it to your business for an agreed term, with a residual value payable at the end. The financier holds legal ownership during the term while your business has full use of the asset.
What is a finance lease?
A finance lease is an arrangement where the financier buys the asset and leases it to your business for an agreed term, with a residual value payable at the end. The financier holds legal ownership during the term while your business has full use of the asset.
Example
A printer worth $80,000 on a 48-month finance lease with a 25% residual leaves $20,000 payable, refinanceable or settleable at term end.
Why it matters
The lease payments and the end-of-term residual are treated differently from a chattel mortgage for tax and GST, so the structure choice has a real dollar effect.