Can you lease a company car for your business? 

Have you heard of a novated lease?

When most people think about a car for their business, they think of leasing. Leasing still involves applying for finance like any other loan. The motor vehicle is used as security for the leasing finance. The part I don’t like is the requirement to have a residual (balloon payment) at the end of the leasing period. In my experience, a lot of people do not have the money to pay the balloon payment and end up extending their finance, usually two years, to payout the balloon payment.

You may have heard of Novated Leasing. This is a scenario where an employee leases a motor vehicle and whilst they are employed with their employer, their employer will make the lease payments. Under a salary packaging arrangement. The advantage for the employee will always be their car. The advantage for the employer is no obligation to the debt if the employee leaves.

The tax deduction for leasing is the lease payment. GST claims are 1/11th of the lease payments. If the value of your car is above the depreciation limit, the tax deductions are a lot more complicated, and you will no longer be your accountant’s favourite client.