Owning a vehicle can be a substantial investment that can impact a business’s cash flow and become hard to manage and track all the associated transactions that are attributed to running a vehicle.Where you do currently own a vehicle for your business a sale and leaseback arrangement could ease these problems.
The Sale and Leaseback Process
This arrangement is where PAR Leasing buys the vehicle from you and your business and then leases it back to you under an agreed leasing structure. Allowing you to unlock the capital that is tied up in the vehicle or fleet.
PAR Leasing holds ownership of the vehicle, but you still retain its productive value and use.
This release of equity back into your business will allow you to undertake growth or focus on projects that you had put on the back burner.
The Benefits of Sale and Leaseback for businesses
There are various reasons a sale and leaseback arrangement may benefit businesses.
Releases capital
A sale and leaseback arrangement allows a client to free up capital. They may use it to fund other aspects of their business which have higher rates of return.
Monthly repayments
The client enjoys fixed monthly repayments, which allows for better budgeting and cost allocation.
Long-term financial return
A sale and leaseback agreement allows a client to lock in long-term financial returns.
Running cost management
By entering into a sale and leaseback arrangement allows you and your business to take advantage of the managed services that PAR Leasing offers, such as maintenance and tyres. Also allowing you access to fleet prices and discounts that you would not normally have access to.
Ownership vs Leasing
Both the ownership and leasing of a vehicle have benefits. Either serves a client, depending on the needs and circumstances of their business. PAR Leasing are here to assist you with determining these and providing you with information to help you make the best decision.
Ownership
Ownership offers a client the security of their tenure over the vehicle.
It also allows them to use the vehicle in the way they choose, and their rights over the property remain in all circumstances.
It also ensures against the vehicle being repossessed at any time by the other party.
Leasing
When companies lease previously owned vehicles, they free up capital that they can use for other purposes. Such an arrangement also offers them the flexibility of tenure. Companies can lease cars for short, medium, or long terms.
Sale and Leaseback vs Traditional Financing
Traditional financing involves a lender issuing a loan for a vehicle. The ownership of the car remains with the borrower, but the lender will have liens on it.
A sale and leaseback arrangement is a different arrangement regarding ownership, operating expenses, financing costs and risk, as explained below. Its structure maximises accounting, tax, and financial benefits for all parties.
Ownership
Unlike a conventional loan, the financier (PAR Leasing) will retain ownership of the vehicle. The client may claim it at the end of the lease or choose to set up a new one.
Operating expenses
PAR Leasing is responsible for all operating expenses, which makes them tax deductible.
Financing cost
PAR Leasing purchase the vehicle and charges the client lease payments for use of the vehicle. Lease payments will be based on GST exclusive finance and with the monthly rentals being GST claimable. The lease can also be structured across a term that suits the requirements of the client where credit rating allows.
Risk
The client carries the risk in a sale and leaseback agreement. If they cannot make the lease payments, PAR Leasing has jurisdiction over the vehicle.
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