Operating Lease 

An Operating Lease, Equipment Rental or Rental Agreement is a versatile option for financing high depreciation, short life span new technologies such as computers, telephony and all other office equipment which generally have a short lifespan due to high obsolescence. The finance company purchases the equipment and rents it to you for an agreed payment schedule over a fixed term. Whilst similar to a Finance Lease, an Operating Lease has greater flexibility.

It provides the ability to upgrade to new technology through a simple variation of your existing contract (certain criteria applies). This variation can be implemented during the initial term of the agreement. You can add in pieces of equipment and if required replace or upgrade equipment. You can choose to have maintenance software installation and other intangible items included in the agreement.

How an Operating Lease works   

Term: The term of finance agreement can be from 1 - 5 years and must be in accordance to ATO Guidelines.

Deposits: Deposits are not required. The full purchase price must be financed.

Residual/Balloon: You must have a residual payment as the last payment of your finance agreement according to ATO Guidelines. This residual value is determined by the finance company and the finance company is responsible for paying it. Be aware that the residual values are generally not disclosed to you.

Owner of the goods: You have possession and use of the equipment, however, the finance company shoulders most of the risk of ownership.

Expiry of Rental Period:
At the end of the Rental Period, you have a number of options:

  • Return the goods to the finance company, without any responsibility for loss incurred by the finance company for the resale.
  • Return the goods to the finance company and enter into another agreement on new upgraded equipment.
  • Purchase the equipment at a fair market value (usually very low due to the high depreciation of the equipment).
  • Re-rent the goods at a lower rate for a further term

Accounting Benefits: Rental payments are 100% tax deductible because they are treated purely as an operating expense - the equipment must be used solely for business purposes. Rentals do not appear on the balance sheet, therefore there is no contingent liability. Rental payments are subject to GST, with the amount financed being exclusive of GST. However you may be liable to pay fringe benefits tax (Please refer to the ATO at: www.ato.gov.au/businesses for further information).

You should always seek advice from your accountant on the rules and how they apply to your particular business and equipment.

Other Options to Operating Lease

If you are considering an operating Lease you  may also want to take a look at as other possible finance options.:

    Would you like to know more?

    Do you have any questions or would like to know more about how an Operating Lease would work for your business?

    Then please contact us in the following manner:

    Ph:  02 42-728250
    Fax: 02-42 718567
    Email david@cfsfinance.com.au

    Would you like to arrange a Quote?

    Please simply fill in the
    Online Equipment Finance Quote and we will will get back to you with 24 hours.

    David Carruthers is a credit representative (Credit Representative Number [400226]) of BLSSA Pty Ltd (Australian Credit Licence No. 391237).