Originally posted by GTHO4
I'm self employed which lease would be better for me?
OK. Being self employed makes leasing a lot more affordable.
A lease is actually a rental agreement of sorts and the rental payments become tax deductable.
The reason I previously mentioned having a higher % of the vehicle use for business is that you have a larger claim against taxation.
i.e. A lease rental of $ 1,000.00 per month with the vehicle being used for 100% business use you would have a tax deduction of $1,000. Based on a tax rate of 49cents in the dollar thats a saving of $490.00 per month. The larger your deduction the greater the taxation saving.
Just remember, it costs you $1 to save up to .49cents.
Leasing is used mainly when you wish to keep the asset updated. This is why most Motor vehicle leases are based on 3 year term with around a 30 - 40% residual payment at the end.
The residual is the asset purchase cost less, depeciation over the alloted period. In other words you car would be worth 30 - 40% of its purchase price in 3 years time.
You would then trade it in, use the tradein figure to payout the residual on the lease and go again with another lease on a new vehicle.
Everyone's business and cashflow is different so the best person to ask which lease is best for you is your Accountant. Because Leasing is a taxation driven type of finance they should be able to recommend the best one for you.
If you have a high percentage of private use of the vehicle leasing becomes unattractive as the taxation benefit is minimal. (You can only claim the portion of the vehicle used in the business). Also lease rentals are subject to GST and without an ABN and being registered for GST you cannot claim it back.