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Frequently Asked Questions

What are the benefits of fleet leasing?
Fleet leasing enables companies to focus on running their business rather than dealing with the many administrative issues associated with managing a fleet.

Outsourcing your fleet management reduces the risk and complexity associated with motor vehicle ownership. In particular for small or medium businesses, outsourcing your fleet management helps manage your cash flow and capital – which can be crucial to your business.

Other benefits include eliminating asset and maintenance risks, flexibility of fleet composition, reduced administrative burden, up-to-date information about government regulation and ensuring a modern fleet that is fit for purpose.

What types of leases are there?

There are many types of leases available to business, each with their own benefits. 

Common leases are:

  • Novated lease
  • Operating lease
  • Finance lease

What is a novated lease?
Novated leases have become an increasingly popular form of vehicle utilisation over recent years.  A novated lease combines many features of more traditional forms of vehicle leases to deliver some attractive benefits for both employers and employees.

A novated lease is an agreement between the employer, the employee, and the financier. The obligations to meet the repayments under the lease sit with the employer, with the employee salary sacrificing a portion of salary to cover the lease rental. A novated lease can be structured as either a finance or operating lease.

The employee has the right to take the vehicle with them if they change jobs. Also, novated leases can provide other advantages to employees through their remuneration package.

What is an operating lease?

An operating lease can be viewed as a rental agreement. Some of the benefits of this type of lease are:

  • No risk associated with ownership and residual value liability
  • At the end of the lease the vehicle can be returned
  • Working capital is maintained
  • Lease rentals are fully tax deductible if the vehicle is used to generate taxable income
  • No resale value risk at the end of the lease

Another important feature of an operating lease is that the finance cost is known for a fixed period of time - great for budgeting the cost of new vehicles.

What is a finance lease?
A finance lease is an agreement that obliges the lessee to indemnify the lessor in relation to the residual value of the vehicle at the end of the lease. 

The lease agreement sets out the residual value, term of the lease and monthly rental.

Any shortfall in the residual amount and GST is the responsibility of the lessee.

What if I only need a short lease?

Some fleet leasing companies provide short or ‘mini leases’. These are ideal for interstate visitors, new employees on probationary periods, and short term projects and contracts.

How do I know which lease is right for my company?

Your fleet leasing company will work with you to determine the best type of lease for your company’s needs. This may in fact be a combination of different types of leases.

What if I need a range of different vehicle types?

Most fleet leasing companies can provide a range of vehicles, from passenger, utility and heavy vehicles.  You can discuss all of your leasing needs with them.

What if I need materials handling vehicles like forklifts?

Many fleet leasing companies can also provide materials handling and industrial vehicles. You can discuss all of your leasing needs with your leasing partner.

What happens if an employee with a fleet vehicle leaves?
What happens to the fleet vehicle depends on the type of lease structure your company has with your fleet leasing company. If you had a novated lease, the employee would normally take it with them. This type of lease reduces the administration on your company and the need to return or reallocate the fleet vehicle.

What happens if an employee with a fleet car is retrenched?

Again what happens to the vehicle depends on the type of lease structure. There are insurance policies available to cover employees’ lease repayment obligations in the event they find themselves involuntarily unemployed. Employees should check their own fleet leasing company.

What is considered fair wear and tear on fleet vehicles?

Reasonable wear and tear depends on the vehicle, its average mileage and the purposes it is used for.

AFLA publishes the Fair Wear and Tear guide.


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