A Finance Lease is a business facility which suits sole traders, partnerships, companies and individuals. A Finance Lease is an agreement between the customer and the financier where the financier purchases the vehicle on behalf of the customer and then leases it back to the customer. The customer pays a fixed monthly payment for the term of the loan. At the end of the term the customer has the option to either refinance the residual, trade the vehicle in or take ownership of the vehicle. As the customer is only leasing the vehicle from the financier, the financier retains ownership of the vehicle therefore they claim back the GST price on the vehicle. The loan amount is reduced as the GST is deducted. GST is charged on the monthly repayment and on the residual. If you are registered for GST you are able to claim some or all of the GST charges as input credit.
Finance lease is suitable for businesses that want lower repayments with the option of upgrading the car at the end of the loan.