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Finance type

Finance Lease

The lender buys the asset and leases it to your business over its useful life. Lease payments are an operating expense. Common for plant, machinery and IT.

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Quick answer

A finance lease is an arrangement where the lender owns the asset and rents it to your business for an agreed term, with you taking on most of the risks and rewards of ownership economically. Lease payments are treated as an operating expense for tax purposes. At the end of the term you typically have an option to purchase the asset, extend the lease, or hand it back. Indicative NZ finance-lease rates run from similar levels to hire purchase, with terms commonly 24–60 months.

Who it suits

  • You want lease payments treated as an operating expense
  • You do not need ownership of the asset from day one
  • The asset will be used heavily through its economic life
  • You want predictable fixed payments without large upfront cash

Pros

  • · Lease payments are deductible operating expenses
  • · No GST charged upfront on the asset — GST is on each lease payment
  • · Often easier approval than a traditional loan for new businesses
  • · Predictable fixed payments
  • · May suit assets with strong second-hand market (machinery, plant)

Cons

  • · You do not own the asset during the term
  • · Buying out at end of term usually requires negotiating residual
  • · Less flexibility than hire purchase if you want to sell mid-term
  • · Accounting treatment under NZ IFRS 16 may bring lease onto balance sheet

At a glance

Ownership during termLender owns the asset
Ownership at end of termLender (with option to purchase at residual)
Balance sheet treatmentOn balance sheet under IFRS 16; operating expense pre-IFRS 16
Who claims depreciationLender
Who claims tax deductionYou — full lease payment is deductible
GST treatmentGST on each lease payment (not upfront)
Typical term24–60 months
DepositTypically $0 (sometimes 10% advance rental)
Residual / balloonAgreed residual value at end of term
End-of-term optionsBuy out, re-lease, or hand back

Finance-lease indicative rates and residuals depend on asset type, term, expected resale value, lender and your business profile. All offers subject to lender credit approval.

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Related finance options

Hire purchase

You own the asset at the end of the term. Most common structure in NZ.

Operating lease

Rental-style, often bundled with maintenance — common for fleets and IT.

Frequently asked questions

In a finance lease the lender buys the asset and leases it to your business for an agreed term, typically 24–60 months. You pay regular lease rentals which are treated as an operating expense, and at the end of the term you usually have the option to buy the asset at an agreed residual value, extend the lease, or return it.