When financing a car in Australia there are several options. The options vary depending on if you are a company financing a car or an individual. A business can finance a car through a finance lease, commercial hire purchase, a chatell mortgage, novated lease, or a fully maintained novated lease. An individual has the option of a commercial hire purchase, novated lease, fully maintained novated lease, or a car loan when financing a car.
When using a finance lease, it enables the leaser to use the vehicle and have all the benefits of car ownership, while the financier actual owns the car. A fixed monthly payment is paid to the financier. A commercial hire purchase is used when an individual or company “hires” a car, while the financier actual owns the car. At the end of predetermined time frame, the person has the option of buying the car. A fixed monthly payment is made to the financier, with the option to buy the car. When using the chattel mortgage, a company gains ownership of the car while the financier loans them the money to purchase the car and holds a mortgage to ensure the loan.
A novated lease is a form of salary packaging a car. An employee leases the car, while the employer takes on the employee’s obligations under the lease and pays the monthly rental fee out of the employee’s pre-tax salary. A fully maintained novated lease is another form of salary packaging a car. An employee leases the car and the operating costs of the car, while the employer takes on the obligation under the lease and pays the monthly rental fee and operating costs out of the employee’s pre-tax salary. Click here to use our novated lease calculator.
Each financing option comes with pros and cons and needs to be fully reviewed and considered by the company or individual prior to financing a car. If you need assistance in determining your best option you should contact a finance consultant.