Business Loans Australia :: Articles

Car Leasing

What is car leasing and how does it work?

Car Leasing

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

Leasing is an often misunderstood car financing option so, in response to subscriber feedback, we've included this article to help give you a better understanding of what it is and how it works.

What's leasing all about?

Leasing is really just another form of borrowing to finance a car. 

But unlike loan finance - where you take ownership of the car and offer it or something else as security to the lender - lease finance sees a leasing company take ownership and give you the use of the car under contract for a specified period.

Lease contracts

Upon signing your lease contract you agree to make regular monthly lease payments, keep appropriate insurance, pay any vehicle taxes or fees, and take good care of the vehicle.

Further, you agree that you'll keep the car for a specified period - typically two to five years - and you're expected to stick it out to the end of the lease contract.

At the end of the lease period, there is often an option to purchase your vehicle at a specified price. 

Or you may be able to use the car as a trade-in on a new car.

Otherwise, the leasing company will expect the vehicle to be returned with no more than normal wear and tear. 

You may have to pay them for any damage or extra mileage over and above a contract-specified limit.

Lease or buy?

Leasing may involve lower monthly payments than a car loan but this is often because you are only paying off a portion of the vehicle’s value, leaving a 'residual' amount at end of the lease period. 

And at lease end, you will not own the car.

Leasing is often promoted as a cheaper way to finance a car because of the tax advantages it can bring for the self-employed or those who take out a novated lease through their employer. 

This is not necessarily the case and really depends on how much mileage will be clocked up overall, what proportion is for work purposes, and what tax rate you are on.

Published: Sunday, 1st Aug 2021
Author: Paige Estritori

Rate this article

0 Comments

No comments yet. Be the first to share your thoughts.


Business Loans Articles

Start-Up Loans in Australia: How New Businesses Can Access Capital
Start-Up Loans in Australia: How New Businesses Can Access Capital
Starting a business in Australia often requires capital before revenue is consistent. This guide explains how start-up loans and other business finance options may help new businesses fund operations, equipment, technology or growth, and what lenders commonly look for before offering finance. - read more
Business Loan Refinancing and Sustainable Business Growth
Business Loan Refinancing and Sustainable Business Growth
Business loan refinancing involves replacing existing debt with a new loan under different terms. For Australian businesses, refinancing may help improve cash flow, simplify debt management or align repayments with longer-term growth plans, but the costs and trade-offs need to be assessed carefully. - read more
Personal Guarantees and Security for Business Loans in Australia
Personal Guarantees and Security for Business Loans in Australia
Personal guarantees, collateral and security interests can affect both a business and the people behind it. This guide explains key risk concepts Australian SME owners, sole traders and company directors should understand before signing a business loan agreement. - read more
Alternative Funding Options for Your Australian Business
Alternative Funding Options for Your Australian Business
When it comes to starting or expanding a business in Australia, securing funding is often a top priority. However, traditional funding options, such as bank loans or government grants, can be difficult to obtain for small businesses. - read more
How Business Loan Interest Rates Work in Australia
How Business Loan Interest Rates Work in Australia
Business loan interest rates in Australia vary because lenders price each loan according to the product, market conditions, business risk, security, loan term and the applicant's financial position. Understanding these factors can help SMEs compare loan offers more confidently. - read more
Understanding Business Loan Repayments: How Repayment Amounts Are Calculated
Understanding Business Loan Repayments: How Repayment Amounts Are Calculated
Business loan repayments are shaped by the amount borrowed, interest rate, loan term, repayment frequency, fees and repayment structure. Understanding how these factors interact can help Australian business owners estimate affordability and compare loan options more confidently. - read more
Common Mistakes to Avoid When Evaluating Your Refinancing Options
Common Mistakes to Avoid When Evaluating Your Refinancing Options
Refinancing can be a powerful tool for small and medium enterprises (SMEs) in Australia. It offers an opportunity to restructure debt, potentially secure better interest rates, and the possibilities of improved cash flow - all critical elements for maintaining and growing a business. Given the dynamic nature of financial markets, refinancing can provide businesses with a strategic advantage to manage their finances more effectively. - read more

Finance News

SMEs Turn to Non-Bank Funding as Investment Plans Hold Up
SMEs Turn to Non-Bank Funding as Investment Plans Hold Up
28 Oct 2026: Paige Estritori
Australian SMEs planning their next round of investment are increasingly looking beyond traditional bank funding, with new ScotPac SME Growth Index findings reported by Inside Small Business on 22 October 2026 showing non-bank finance has reached a record share of intended funding use. The result is a notable signal for business owners and finance managers: the question is no longer simply whether credit is available, but which structure best matches the timing, risk and cash flow profile of the business. - read more
Business Confidence Signals Put Loan Readiness Back in Focus
Business Confidence Signals Put Loan Readiness Back in Focus
16 Sep 2026: Paige Estritori
Latest Australian business survey reporting is sending a practical message to owners and finance managers: trading conditions may be holding up in parts of the economy, but confidence remains fragile. For SMEs, that mix matters. When revenue is uneven, input costs are sticky and customers are cautious, the timing and structure of new borrowing can become just as important as the headline interest rate. - read more
Why ATO Interest Changes Matter for Business Borrowers
Why ATO Interest Changes Matter for Business Borrowers
09 Sep 2026: Paige Estritori
A tax change now working through Australian business finances deserves close attention from owners, directors and finance managers. Since 1 July 2025, the ATO’s general interest charge and shortfall interest charge have no longer been tax-deductible. For businesses carrying overdue tax or correcting underpaid obligations, that can lift the effective after-tax cost of falling behind. - read more
Payday Super Puts Payroll Timing Under the Finance Microscope
Payday Super Puts Payroll Timing Under the Finance Microscope
02 Sep 2026: Paige Estritori
Australia’s move towards Payday Super is more than a compliance update for employers. For many small and medium-sized businesses, it changes the rhythm of payroll-related cash outflows and places a sharper focus on whether day-to-day liquidity is strong enough to meet obligations as they fall due. - read more
Specialist SME Lending Remains Open, But Discipline Matters
Specialist SME Lending Remains Open, But Discipline Matters
26 Aug 2026: Paige Estritori
Latest market reporting around specialist SME lender Judo Bank points to a business credit market that is not shutting down, but is becoming more deliberate. The lender’s continued focus on relationship-led lending, deposits and small to medium-sized business borrowers suggests demand for finance remains present among firms with clear plans and serviceable cash flow. - read more
Payment Timing Keeps Pressure on SME Working Capital
Payment Timing Keeps Pressure on SME Working Capital
19 Aug 2026: Paige Estritori
Fresh small business indicators are again pointing to a familiar challenge for Australian SMEs: trading activity may continue, but the timing of cash receipts is still creating pressure. Recent industry commentary has highlighted uneven payment behaviour, cautious customer spending and a more deliberate approach to investment among smaller firms. For owners and finance managers, that combination can make working capital planning just as important as sales growth. - read more
Payment Delays Put Working Capital Back on the SME Agenda
Payment Delays Put Working Capital Back on the SME Agenda
12 Aug 2026: Paige Estritori
Late invoice payments are again emerging as a practical funding issue for Australian small and medium-sized businesses, with fresh industry commentary pointing to continued pressure across trade payments, cash reserves and day-to-day operating liquidity. For business owners, the message is clear: revenue on paper is not the same as cash in the bank. - read more


Knowledgebase
Closing Costs:
The expenses over and above the price of the property incurred by buyers and sellers when transferring ownership of a property.