22 July 2021 · Motoring Tips & Advice

What is an Operating Lease?

A quick guide to vehicle financing.

At Phil Gilbert Hyundai, we know purchasing business vehicles outright can be expensive. But there are other cash flow-friendly options for businesses large or small – no matter how many cars, vans or utes you need to run your business.

An Operating Lease can be a cost-effective way to manage the costs associated with buying and running a work vehicle with one set, monthly payment. If the vehicle is used for business purposes, you may be able to claim the monthly leasing cost as a tax deduction*.

How does an Operating Lease work?

With an Operating Lease, the lender purchases the new vehicle on your behalf, and then leases it to you for a fixed period. Your business has full use and exclusive rights to the vehicle during the term of the lease, but ownership remains with the lender.  At the end of the lease term, you simply hand the car back to the lender in good condition and within the agreed kilometre limit, with no more to pay+.

Advantages of an Operating Lease

An Operating Lease can simplify business cash flow. Most vehicle running costs, such as servicing, registration, tyres and roadside assistance, can be included in the monthly fixed payment. That can help you manage the monthly ups and downs of business revenue, helping improve budget forecasting.

You can also choose your lease term – ranging from 24 to 60 months – to suit your monthly budget, giving you more certainty about the total operating cost of the vehicle. At the end of the lease, you simply hand the vehicle back to your lender who can help lease your next vehicle with a new Operating Lease.

Other benefits of an Operating Lease include: 

  • Improve cash flow – Lease payments are set up front and remain the same for the life of the lease.
  • Running cost certainty – Vehicle running costs such as servicing, registration, tyres, roadside assistance and CTP can be included in the monthly lease payment.
  • No residual payment –  At the end of the lease period, simply hand the vehicle back in good condition and within the agreed kilometre limit.
  • Reduce your depreciation expense – The lender owns the vehicle, so that’s one less issue for your accountant.
  • Tax efficient – Depending on the percentage of business use, you may be able to claim the GST paid and lease payments as a tax deduction*

Talk to us

We’ve teamed up with ORIX Australia to provide our business customers with a range of flexible vehicle leasing and finance solutions. To find out if an Operating Lease is right for you, speak to our finance team today by enquiring below or call 9735 8400.

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Phil Gilbert Hyundai

Finance & Insurance

646 Parramatta Road
Croydon, NSW 2132

02 9735 8400
Finance & Insurance Manager
Sam Anttoun

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*Up to the luxury vehicle threshold limit. Talk to your tax agent or financial advisor about whether you can claim the upfront GST and tax deductions for your business. 

+ If a vehicle has more damage than is assessed as fair wear and tear, there will be additional charges at the end of the lease (off-lease damage charges).  If your vehicle has travelled over the agreed kilometre limit, then there will be excess kilometre charges for each kilometre over the agreed kilometre limit.