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Hire Purchase

A commercial hire purchase is a tax effective way to acquire your motor vehicle or plant and equipment.

  • Minimum borrow amount is $10,000, Maximum $300,000
  • Terms range from 1 to 5 years
  • Competitive interest rate of 7.99%
  • 100% financing is available to approved applicants
  • A deposit can be paid against the purchase price of the motor vehicle or plant and equipment
  • The loan can be structured with a ‘balloon payment’ (i.e. a residual amount as the final payment). This represents the estimated value of the vehicle at the end of the contract and is based on the depreciation rate/s of the ATO (see example below)
  • Once the final payment is made be it the normal monthly rental or if the loan is structured with a balloon payment, you become the outright owner of the vehicle

Why use Absolute for Commercial Hire Purchase?

  • This product enables you to purchase the motor vehicle/s or plant & equipment of your choice without providing large amounts of capital
  • If the vehicle or goods are used for generating assessable income the tax benefits are derived from the interest paid on the contract and the depreciation claimed against the motor vehicle or plant & equipment
  • Fixed regular repayments protect the business from rising interest rates and inflation
  • Allows for accurate budgeting, as costs are known in advance
  • A one-off establishment fee of $100 is charged to set up approved loans. There are no regular monthly fees on established loans
  • In the majority of loans provided the only security required is the motor vehicle or plant & equipment
  • In most instances there is no initial outlay -by paying a deposit you may benefit from lower repayments and/or a shorter term
  • Direct debit for easy and convenient payment

Residual Value Estimate based on Taxation Guidelines:

Let’s assume you purchase for cash a standard motor vehicle sedan with a purchase price of $20,000 and the vehicle is to be utilised predominantly for business purposes.

The vehicle will appear on your balance sheet as an asset for $20,000. The tax office changed the methodology on depreciation and introduced an effective life policy on the 21/09/1999. For motor vehicles the effective life is (7) seven years, travellers’ cars (5) years and taxis 4 years.

As a guide only, when applying the Diminishing Value method for depreciation for a standard vehicle (this would approximately equate to 22.5%), the motor vehicle’s written down value each year and the residual percentage applied to your lease (assuming the vehicle was purchased on the 01/07/2000) would be as follows:

Purchase Price


W/D Value %

Residual Value %

Year 1 Depreciation




Written Down Value Yr 1




Year 2 Depreciation


Written Down Value Yr 2




Year 3 Depreciation




Written Down Value Yr 3




Year 4 Depreciation


Written Down Value Yr 4




Therefore, a three (3) year lease would normally have a residual of approximately 40% (max.50%) whilst a (four) 4 year lease approximates to a 35% residual (max. of 40%).

There are variances to the above including lower residuals for rental vehicles or similar high usage vehicles. High residuals may apply for prestige vehicles.

Note that GST applies to the rental and residual value. 

The above is a guide only and as a rule you should seek clarification from your accountant.

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