Operating Lease for Business
An operating lease is a great option for businesses that don't want to invest huge amounts of capital in vehicles. All maintenance and running costs are included – which removes the need for fleet admin. With an operating lease, you basically pay to ‘rent' an asset for an agreed period and then return it to the lessor (finance provider), so you hold none of the risks of ownership or eventual disposal. You get exclusive use of the car, but your business doesn't own the vehicle.
Flexible Commercial Car Finance
Savvy has access to a range of specialist operating lease providers – and the advantages of this type of agreement are many. The fixed-cost payments are tax-deductible for the entire term. Operating leases are shorter-term business car finance solutions – also used for other assets and equipment – and don't run for the whole service life, unlike with a finance lease. There's no residual risk, and when the term is finished, you just hand the vehicle back and upgrade to a new car.
Operating leases to suit your business - and more choice
How to qualify for an operating lease, and how to apply
The lessor will look at your financials and accounts much like when you take out a loan. Decisions get based on your level of debt, ongoing finance, and your operational cash flow. Having an excellent credit history will probably open up more scope in terms of what the lender is willing to make available. Savvy's expert consultants can help assess your vehicle needs and recommend a lessor based on your situation.
The pros and cons of using an operating lease
If you're running several vehicles, an operating lease is like outsourcing fleet admin. Maintenance and registration, and all the scheduling, are included in the cost of the lease.
Leasing a car with a shorter-term operating lease means you can upgrade more often than with a finance lease – without the capital outlay required to buy vehicles outright.
No risk of ownership
There's no time and cost-consuming buying and selling for businesses that need to change vehicles regularly. You can run presentable and reliable cars without any ownership or disposal risks. Disposal and residual risks basically amount to the car not being worth the value of any remaining finance at the end of a lease term – which can happen with a finance lease.
The regular payments made on an operating lease are tax-deductible. It's pretty much like renting a vehicle over a reasonably long period, so you can claim it as a cost of doing business. Also, because the lessor claims back any GST in the purchase price, your payments get based on the GST-free value of the car.
Because you're not leasing a vehicle or machine for the whole of its serviceable life, lessors specify usage limits.
Signwriting, saleable condition
Operating leases allow for expected wear and tear, but you'll need to return a vehicle in good condition. That means removing signwriting, for instance.
No purchase option
Unlike with finance leases, there is no option to buy built into an operating lease. Cars typically get sold at public auction once a rental term ends.
Not suitable for long-term use
If you don't need or want to upgrade vehicles often, a finance lease may work out better than an operating lease. You get the option to own cars at the end of the term, and that works well when you want to use vehicles for several years.