It is a common concern that buying new equipment can come at considerable up front cost which eats into valuable business capital. If this is the case with your business, then it's worth considering the range of finance and leasing solutions that are designed specifically with this in mind. For example, repayments can be tailored to fit with your seasonal cash flows and depending on the arrangement, 100% of the cost of the equipment or vehicle can be financed. With fixed rates in play, this will provide peace of mind in knowing exactly what your repayments will be and how much work that item of machinery needs to take on before you break even.
When you’re considering finance options in the market, you need to think about the key items like repayment amounts, other costs or fees associated with the finance and your options at the end of the term. The other important thing to remember is that a low interest rate does not necessarily guarantee a low repayment. Sometimes other costs can be factored in to very low rate offers meaning you may be financing more into the agreement to pay for the lower interest. Negotiate the finance and the cost of the asset separately – that way you can get the best possible deal on both.
Maximise the tax benefits on your assets
Using asset finance to buy equipment for business purposes can also provide potential tax benefits.
Depending on the type of finance you get, you may be able to claim your interest or rental payments, depreciation on the asset.
Car and equipment finance can also help you reap short-term tax benefits, by bringing your planned purchases forward into the current financial year — so you can start claiming potential deductions straight away.
If you already have financing arrangements in place, talk to your accountant to make sure you’re claiming all the deductions you’re entitled to.
If you’re thinking about buying new cars or equipment in the near future, you should consider putting a pre-approval in place. That way if you need to move quickly, you’ll already have the finance available to act. Plus, a pre-approval allows you to negotiate at the dealer with confidence to ensure you get the best possible price.
Along with a range of different finance solutions in the market, there are also a number of incentives still in place from the Federal Government that you may be able to take advantage of. So before making any decision, check with your accountant or financial planner.
End of financial year discounts
The end of financial year can also get you more for your money, with many equipment suppliers offering significant discounts and value added incentives like extended warranties and free options to help finalise the deal.
Traditionally, June is the busiest month of the year for equipment financiers as well as equipment suppliers due to demand. The earlier you get organised the more chance you have to get everything finalised before 30 June.
Four business finance solutions to consider
- Equipment loan (or Chattel mortgage): A fixed-term loan where the finance provider holds a mortgage over the financed equipment as security until you pay off the loan. Depreciation of the asset and interest charges may all be tax-deductible.
- Hire purchase: Your finance provider buys the equipment or vehicle then transfers the ownership to you once you have made the final payment. You may be able to claim the interest and the depreciation of the asset.
- Finance lease: You lease the vehicle or equipment from your finance provider for a fixed term and at the end of the lease term, you can make an offer to buy — and your lease payments are potentially tax-deductible.
- Operating lease: A fixed-term rental agreement where your bank leases the equipment to you, giving you the choice of returning the equipment, upgrading it, or extending the agreement at the end of the term. Your rental payments may be tax-deductible.
You can compare financing solutions online at commbank.com.au/assetfinance or call 1800 ASSETS (277 387) to speak to one of our Equipment Finance specialists today.