How do you lease a vehicle? Uh, uh, shouldn’t you first be asking: why would I ever want to lease a car?
Well, there are excellent reasons why you may choose to lease a car in Australia. However, to start with, let’s understand how leasing a car works in Australia.
What’s Car Leasing?
Car leasing is a fairly simple process. You identify a car or other vehicle you would like and the car leasing firm you prefer. After you sign a lease contract, the leasing company will provide you with the car for a fixed time, which is called the lease term or the lease period. In exchange, you will be required to pay the car leasing firm a monthly payment for the lease term. These payments are called lease payments.
At the end of your current lease, you may choose to extend the lease, start a new lease, or trade it in before the expiration of the lease. If you choose the latter option, you will likely incur a surcharge.
You must note that you would normally need to involve your employer to facilitate your vehicle lease, which is called a novated lease.
Why You Should Consider Leasing
Are you all up to speed on leasing? We can now discuss the benefits of doing so.
- Lower monthly fees: Your monthly lease payments would be lower than payments made under a car financing deal.
- Change your car frequently: You can change your car once the normal or operating lease has reached its full term.
- Save maintenance costs: Your lease conditions will usually have a clause that gives you some maintenance coverage as part of the deal. This cancels out your car fixing and some ongoing running costs out of pocket.
- Tax benefits: Once your employer agrees, you can use a novated lease arrangement to gain valuable tax benefits from your lease.
- Avoid high upfront payouts: Unlike buying a car outright or finding your vehicle with a car loan, leasing frees you from making that huge initial upfront payment.
Choosing a Leasing Company
While still answering the question: how do you lease a vehicle, it’s important to note that the car leasing firm you select is key to a successful and satisfactory lease. Some factors you must look at include:
- How long they’ve been in business and their reputation
- Flexible payment plans
- Price and other fees (hidden and open)
- Reviews from past customers
- Location and after-sales services
- Other services offered and any extra benefits to customers
The Lease Agreement
Now that you have seen the right car and the right company, it’s time to sign the lease agreement or contract. The lease agreement is a legal document that specifies each detail of the lease agreed to by you, the vehicle lessee, the car leasing firm, and the lessor.
Some of the things you need to have spelt out in the lease agreement in unambiguous language are:
- Registration details of the car
- Lease period
- Purpose of the lease, whether for business or private use
- Monthly payments
- Lease mileage allowed, which details how far you can drive per year, measured in miles
- Vehicle’s residual value after the lease term
- Insurance coverage required
- Maintenance issues, meaning who pays for repairs and servicing.
- Early lease termination, including termination fees
- Minimum conditions for vehicle return
- Purchase option by the vehicle lessee
Getting legal advice before signing on the dotted lines of a vehicle lease contract is advisable as some of the language can be pretty technical. Also, if your arrangement is a novated lease, then be sure you understand tax benefits and implications, such as FBT, a government tax you pay on your lease.
The Finance Company
Your lessor in a car leasing undertaking can be a finance company. This type of lease is often called a financing lease or an operating lease. It is usually taken by business owners who require the vehicle for business purposes. In this case, the finance company buys the car on your behalf and retains ownership of the vehicle for the lease.
This is quite different from a car loan, which is when you get a loan to purchase a vehicle for personal or business purposes. You own the car at that point. You are then expected to pay back the principal and an interest rate on the loan, which can all be paid monthly.
However, in a car leasing arrangement with a finance company, you only own the car if you decide to make a residual payment for the vehicle. This is the payment of the car’s residual value after the lease term has expired, or the monetary worth of the car after your use of it, which is calculated at the start of your lease.
If you are making operating lease payments, however, it means you are on an operating lease, in which case the option to own the vehicle outright afterwards is not included in your contract.
Wrapping Up
Do you have a satisfactory answer to the question: How do you lease a vehicle? If you have more enquiries, you can contact Vehicle Solutions, or call us on 0883384427. You may also email us at [email protected].
Frequently Asked Questions
What do you need to lease a car in Australia?
First, you need to be gainfully employed and have your employer agree to obtain a novated lease from a car leasing firm. You should also have a good credit history and proof of residence.
How long can you lease a car or vehicle in Australia?
You can lease a car for as short as three months or for three years, meaning 36 months. Extremely short leases are unusual in Australia, generally speaking.
Can a regular or normal person lease a car?
Unfortunately, no. You must be an employer or a company to be considered for a novated lease. You can arrange for one by requesting one through your company and then making the required lease payments.
Can you lease a car without your employer?
It is quite difficult to lease a car without your employer, except you are a business owner yourself and can make the arrangements using your business.
Are car rental and car leasing the same thing in Australia?
No, they are not the same. Although in both situations, you can use a car you do not own for a specific period, there are apparent differences.
In car rentals, the rental time is calculated in weeks or even days, and you take care of your rental by paying cash or other means. On the other hand, car leasing usually requires paying through a pre-tax salary package, and the lease period can be as long as 3 years.
