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Novated Lease Alternatives

Posted on: May 20, 2014 by Platinum Direct

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If you’re looking for an alternative to a Novated Lease, Platinum Direct Finance offers the following vehicle finance products to employees of its partners. We have access to 16 different lenders so are extremely competitive with rates. Our experienced consultants can discuss your needs and guide you to the best novated lease alternative for a business and its employees. Call us today for more information.

1. Standard loan (bank, credit union, etc)

The financier lends you the money to buy a vehicle. You need to be financially sound and prepared for some extra expenses. It can be secured or unsecured (higher interest rate). The vehicle needs to be insured as it acts as security for the loan

Advantages:

  • Finance can include on-road costs
  • Agreed monthly payments over agreed time period.
  • Low fixed or variable interest rate because finance is secured against the car.
  • Flexible terms for time and repayments.
  • 2. Commercial Hire Purchase

    The financier buys the car outright and then hires it back to you. This product is available for individuals and businesses. Monthly payments pay out the entire loan for the term and you own the vehicle when the period is complete. This product has been almost entirely replaced by chattel mortgages.

    Advantages:

  • Flexibility allows financing of the total price; a deposit or trade-in; or even allow for a lump sum balloon payment.
  • Repayments and interest rates are fixed.
  • Easy to modify to suit borrower’s budget.
  • Low capital outlay and no GST on repayments.
  • 3. Finance Lease

    The financier buys the car and then leases it back to you. This allows for minimal or no capital outlay. These leases are available for individuals and businesses where the car is for business purposes. The motorist pays fixed rental payments and is responsible for the maintenance and trade-in residual risk of the car. At the end of the lease period, the motorist is given the option to refinance, return, sell or buy the car for the residual amount.

    Advantages:

  • Immediate use of the car with little or no capital outlay.
  • Repayments are generally tax deductible, but GST is payable
  • Lease payment is made from pre-tax dollars.
  • Interest rate is fixed and is low because finance is secured against the car.
  • 4. Operating Lease

    An agreement where the financier buys the vehicle and rents it to you. The financier owns the car. You have no risks associated with ownership, including the residual at the end of the period. At the end of the term, you have the option to buy the car, continue to rent it or change to another car.

    Advantages:

  • Businesses don’t list operating leases on balance sheets so doesn’t affect debt ratios, though this may change.
  • Fixed repayments over a fixed period.
  • No risks with ownership and residual payments.
  • Rent is tax deductible
  • 5. Chattel Mortgage

    A fixed loan where the financier advances money to you to buy the vehicle. The financier holds a mortgage over the car (like a house) which is used as security for the loan. You can finance the total purchase price of the car or can make an up-front deposit or can use a trade-in. A residual payment may also be placed at the end of the term.

    Advantages:

  • Motorist takes ownership at time of purchase.
  • Minimal capital outlay.
  • Flexible contract terms.
  • Fixed repayments which can be tailored.
  • Repayments exempt from GST.
  • Depreciation and interest charged are tax deductible.
  • Lower interest rates as finance is secured against the car
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