Lease to own
Lease to own (also often referred to as Hire Purchase) is a
loan secured by the equipment being financed. Title of the equipment will
remain with the financier until the final payment is made, under the agreement
that has been made.
We require a deposit of the GST amount of the equipment, and
installments are due monthly in arrears thereafter i.e. you do not have to pay
the first months installment until a month after you receive the goods.
For financial purposes you can show the equipment as an
asset on the balance sheet and a matching liability for the Lease to own
agreement. The interest portion of the
installment and the depreciation on the asset are usually tax deductible
expenses.
Benefits of Lease to own
Increased cash flow
GST component included in the purchase price can be claimed
almost immediately thus assisting cash flow
Tax deductibility
a) Interest on the loan is usually fully tax deductible.
b) Full depreciation can usually be claimed in accordance with
tax legislation.
Prudent Financing
The equipment appears as an asset, and the loan as a
liability in the balance sheet, thus indicating balanced financing to a future
purchaser or lender.
Ownership
Ownership is total and any capital gain on the asset is
retained in the business.
