A commercial finance product where you hire the vehicle from the lender for a fixed monthly repayment over a set period. Otherwise known as corporate hire purchase, hire purchase or offer to hire.  It’s a good choice if you are registered for GST on an accruals or cash accounting basis.

The lender agrees to purchase the vehicle on your behalf and then hires it back to you over a set period. You’ll have full use of the vehicle for the term of the contract, you just won’t be the owner. At the end of the term, when the total price of the vehicle (minus any residual) and the interest charges have been paid in full, the customer takes ownership of the car.

Benefits include:

• Flexible loan repayment periods, ranging from two to five years
• The option to set a final balance (Residual Value) payment of between 0 and 50% of the full loan amount (depending on the type and age of the vehicle) to reduce monthly repayments
• The option to put down a deposit to reduce the amount borrowed
• The potential to claim tax deductions if the car is being used for business purposes
• The potential to claim Input Tax Credits if you are registered for GST

A commercial hire purchase taken out with Stratton Finance also has these additional benefits (subject to lender selection):

• Fixed interest rate and monthly repayments for the duration of the loan
• Repayments can be aligned with your or your business’ cash flow

If the car is being used for business purposes, you may be able to claim a tax deduction on the loan interest charges, as well as on the depreciation value of the vehicle, up to the Depreciation Limitset by the Australian Tax Office.

GST is charged on the purchase price of the vehicle and, if you’re registered for GST on a cash basis, you should be able to claim this as an Input Tax Credit on your next Business Activity Statement.

You will also pay GST on any term charges or fees.

Both businesses and individuals can apply for a commercial hire purchase, as long as the car is being used predominantly for business purposes.

A commercial hire purchase is a good choice for those who are registered for GST on an accruals or cash accounting basis, as you should be able to claim the GST in the vehicle’s purchase price as an Input Tax Credit on your next Business Activity Statement. You should also be able to claim GST on any interest charged as Input Tax Credits over the lifespan of the loan.