Frequently Asked Questions
What are the benefits of fleet leasing?
Fleet leasing enables companies to focus on running their business rather than
dealing with the many administrative issues associated with managing a fleet.
Outsourcing
your fleet management reduces the risk and complexity
associated with motor vehicle ownership. In particular
for small or medium businesses, outsourcing your fleet
management helps manage your cash flow and capital – which
can be crucial to your business.
Other benefits include
eliminating asset and maintenance risks, flexibility
of fleet composition, reduced administrative burden,
up-to-date information about government regulation
and ensuring a modern fleet that is fit for purpose.
What types of leases are there?
There are many types of leases available to business,
each with their own benefits.
Common leases are:
- Novated lease
- Operating lease
- Finance lease
What is a novated lease?
Novated leases
have become an increasingly popular form of vehicle utilisation
over recent years. A
novated lease combines many features of more traditional
forms of vehicle leases to deliver some attractive
benefits for both employers and employees.
A novated lease is an agreement between the employer,
the employee, and the financier. The obligations
to meet the repayments under the lease sit with the
employer, with the employee salary sacrificing a portion
of salary to cover the lease rental. A novated lease
can be structured as either a finance or operating
lease.
The employee has the right to take the vehicle with
them if they change jobs. Also, novated leases
can provide other advantages to employees through their
remuneration package.
What is an operating lease?
An operating lease can be viewed as a rental agreement.
Some of the benefits of this type of lease are:
- No risk associated with ownership and residual
value liability
- At the end of the lease the vehicle can be returned
- Working capital is maintained
- Lease rentals are fully tax deductible if the vehicle
is used to generate taxable income
- No resale value risk at the end of the lease
Another important feature of an operating lease is
that the finance cost is known for a fixed period of
time - great for budgeting the cost of new vehicles.
What is a finance lease?
A finance
lease is an agreement that obliges the lessee to indemnify
the lessor in relation to the residual value of the
vehicle at the end of the lease.
The lease agreement sets out the residual value, term
of the lease and monthly rental.
Any shortfall in the residual amount and GST is the
responsibility of the lessee.
What if I only need a short lease?
Some fleet leasing companies provide short or ‘mini
leases’. These are ideal for interstate
visitors, new employees on probationary periods, and
short term projects and contracts.
How do I know which lease is right for my
company?
Your fleet leasing company will work with you to determine
the best type of lease for your company’s needs.
This may in fact be a combination of different types
of leases.
What if I need a range of different vehicle
types?
Most fleet leasing companies can provide a range of
vehicles, from passenger, utility and heavy vehicles. You
can discuss all of your leasing needs with them.
What if I need materials handling vehicles
like forklifts?
Many fleet leasing companies can also provide materials
handling and industrial vehicles. You can discuss
all of your leasing needs with your leasing partner.
What happens if an employee with a fleet vehicle
leaves?
What happens to the fleet vehicle depends
on the type of lease structure your company has with
your fleet leasing company. If you had a novated lease,
the employee would normally take it with them. This
type of lease reduces the administration on your company
and the need to return or reallocate the fleet vehicle.
What happens if an employee with a fleet car
is retrenched?
Again what happens to the vehicle depends on the
type of lease structure. There are insurance policies
available to cover employees’ lease repayment
obligations in the event they find themselves involuntarily
unemployed. Employees should check their own
fleet leasing company.
What is considered fair wear and tear on fleet
vehicles?
Reasonable wear and tear depends on the vehicle, its
average mileage and the purposes it is used for.
AFLA publishes the Fair
Wear and Tear guide.
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