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McAdam Siemon
  • Total posts: 17

This is a good question and one that is asked regularly by many business owners and the answer is not straight forward (when is a finance answer ever straight forward).

It comes down to one basic point, how long are you going to hold the car for and what is it used for.

In this case we can assuse it is used primarily business purposes. Now in relation to the over all dediction for a motor vehicle it is true that the difference between leasing and Hire Purchase (loan/buying) is about the same, or not worth worrying about. However if you intend to only hold the car for a few years or until the car is due for refinanced and then turn it over and get a new car a Hire Purchase is the way to go. Many business owners only have a car/ute for 3 years then when the finance is up trade it in and refinance for a new one.

In this case a Hire Purchase or Equiment loan is the option to go with and I will explain why.

Over the life of a lease the deductions remain consistent and you do get a 100% tax deduction this is correct. Thus every year you get the same deduction and pay the same amount for your lease.

Over the life of a Hire Purchase the deductions are high at the begining and reduce over time, due to the face that the deductible amounts are interest on the loan and depreciation on the vehicle.

Therefore if you continually turnover your vehicles a HP is better as you will getter greater deductions than a lease however pay relatively the same amount in cash.

Sam Hodgetts