How to choose between a loan, lease or hire purchase
Most people choose to finance their next car or equipment purchase with a car or equipment loan but if you’re considering a lease or hire purchase, we’ll outline what makes each choice unique.
Car and equipment loan
- A popular choice
- Your business buys and owns the car or equipment from the start
- Your business makes regular repayments to pay back the loan.
- Lease cars or equipment for your business to use for a set period of time
- We buy the car or equipment and rent it to your business and rent it to you for an agreed period
- Once the lease ends, you return the car or equipment to us and pay the lump sum left over.
- We buy and own the car or equipment and your business buys it from us in instalments
- Your business has possession and uses the car or equipment while making regular repayments
- When the final payment is made, ownership of the car or equipment is transferred to your business.
The pros and cons of a balloon payment
Depending on your cash flow, a balloon payment could make sense for many reasons – although there are some downsides to consider too.
- A balloon payment is an amount due at the end of your loan, sometimes called a final repayment amount
- On the plus side, balloon payments keep monthly repayments low and helps free up your cash flow
- On the downside, you’ll be left with a lump sum to pay at the end of the term. You’ll also end up paying more interest.
Can I claim depreciation on my tax return for the vehicle or equipment I buy?
Generally, yes but it depends on your individual circumstances. Here’s an indication of what you may be able to claim:
- Car and equipment loan or hire purchase: the interest on the finance and depreciation of the asset are generally both tax deductible1
- Lease: the rental payments are generally tax deductible.1
Get to know more about financing cars and equipment
Things you should know
Applications for vehicle and equipment finance are subject to the Bank's normal lending criteria.
Eligibility, credit criteria, fees, charges, terms and conditions apply.
This is a general overview and should be used as a guide only. We recommend that you seek independent professional advice about your specific circumstances before acting.
1. The taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and their interpretation. Customers must seek their own independent tax advice in relation to their individual circumstances.