Owning and leasing a vehicle has its own benefits and disadvantages.
Leasing:
The Benefits:
- Monthly lease expense can be claimed
- Potential upgrade option after a certain period
- Running costs such as petrol, repairs and registration can be claimed
The Disadvantages:
- Monthly payments for a vehicle that is not owned
- No depreciation claim
- Potential personal use portion payment
- Only GST can be claimed back on each monthly repayment
Purchasing a vehicle under hire purchase:
The Benefits:
- Can claim the interest portion of the repayments of as an expense
- Repayments are usually smaller than lease payments
- Vehicle owned at the end of the term
- The purchase price can be written off as an expense fully over approximately 3 years for a car and longer for a van
- GST claim for the full purchase price of the vehicle at the start if the business is GST registered
The Disadvantages:
- Potential FBT payment on the cost price
- GST may have to be paid back when the vehicle is sold or traded in
- If the sale price is more than the book value, depreciation recovered may have to be paid back when selling or trading in the vehicle
- Deposit
- Existing vehicle may need to be traded in
