{"id":773,"date":"2020-12-07T11:25:34","date_gmt":"2020-12-07T11:25:34","guid":{"rendered":"http:\/\/nz.legalvision.com.au\/?p=773"},"modified":"2021-03-19T09:39:50","modified_gmt":"2021-03-18T20:39:50","slug":"finance-lease-new-zealand","status":"publish","type":"post","link":"https:\/\/legalvision.co.nz\/property-and-leasing\/finance-lease-new-zealand\/","title":{"rendered":"What Is a Finance Lease in New Zealand?"},"content":{"rendered":"\n

Leasing assets instead of buying them outright can be a useful option for your business. This could be because you do not have the money upfront to buy the asset, or you want better financial terms that will suit your specific circumstances. You can do so using a finance lease, where someone leases the asset to you, and you pay them back in regular instalments. <\/span>For example, say you wish to hire a fleet of cars for your company. Here, you could do so with a finance lease. <\/span>If you are considering entering into a finance lease, be sure to consider the circumstances of your business and whether leasing is the right option for you.This article will explain what a finance lease is and will outline other key information about finance leases.<\/span><\/p>\n\n\n\n

What Is a Finance Lease?<\/span><\/h2>\n\n\n\n

A finance lease is when someone (the lessor) lets you (the lessee) rent out their asset for a fixed amount of time, making rental payments back to them. Often, the lessor will be a person or company that purchases the asset, such as a piece of equipment or vehicle. They will then lease it to you for a time that you both agree on. You will have full rights to use that asset for that specified time, and you can add it to your balance sheet. There is sometimes an option to buy the asset at the end of the lease.<\/span><\/p>\n\n\n\n

For example, a hire purchase agreement for the lease of a forklift could be a kind of finance lease. <\/span>A finance lease effectively transfers the risks and rewards of ownership to you. If you have an option to purchase at the end of your lease, you can legally own the asset as well. However, this depends on the exact nature of your finance lease. It is, therefore, crucial to read through your lease document carefully and understand how it works.<\/span><\/p>\n\n\n\n

The lessor can account for GST (goods and services tax)<\/a> over the period of the lease because they purchased the asset. This means that they can exclude GST from rental payments. The lessor will recover the cost of the asset from you through your regular rent payments and interest.<\/span><\/p>\n\n\n\n

Differences Between a Finance Lease and an Operating Lease<\/span><\/h2>\n\n\n\n

An operating lease functions similarly to a finance lease, in that the lessor still leases an asset to you for a fixed amount of time, and you pay them back through rent payments. However, these two kinds of leases have a few differences. These include that:<\/span><\/p>\n\n\n\n