When you're looking to get a new car, there are many options available to you. Novated leasing, purchasing a car outright, car loans, and other lease payments are all common choices people make in this regard, however, they are not the only options.
Another option that is growing in popularity in Australia is the sale and leaseback. But what exactly is a sale and leaseback? And how does it work? In this guide, we will answer all of those questions and explain how it can benefit employees across the country.
What is a sale and leaseback?
A sale and leaseback transaction is a form of car transaction and arrangement made through multiple parties. You sell your car to a dealership or leasing company and then lease the same car back from that company for an agreed-upon period of time. This means that you can free up a large amount of cash that was tied up in your previous vehicle.
This type of transaction is often used by businesses as a way to release equity from their fleet vehicles. It can also be used by private individuals who are looking to get a new car but don't have the necessary funds available upfront.
How do sale and leaseback transactions work?
The first step in starting a Sale Leaseback transaction is to find a reputable dealership or leasing company that offers sale and leaseback arrangements. Once you have found a suitable candidate, you will need to provide them with some basic information about your car such as the make, model, year, and odometer reading.
You will then need to agree on a finance lease period and selling price for your car. These factors can vary depending on the make and age of the car, however most terms are between 5 and 10 years.
It's important to note that the selling price is usually lower than the market value of the vehicle due to the fact that the dealership or leasing company will be making money from the lease agreement.
Once the selling price has been agreed upon, you will sign over ownership of the car to the dealership or leasing company. They will then become responsible for all future maintenance and repairs on the vehicle.
At the end of the lease, you either pay the remaining outstanding balance on the car or explore other options. The other options available will be determinant on the company you engage with for the sale and leaseback, as well as factors such as the remaining residual value left to pay.
How can a sale and leaseback arrangement benefit you?
There are a few key benefits that come with choosing a sale and leaseback agreement over traditional financing options.
Firstly, a sale leaseback enables you to have the opportunity to get a new car more often than if you were to purchase one outright. This is because once the initial operating lease term is up, you can simply return the car and get a new one without having to worry about selling your old vehicle or being stuck with it for years to come.
Secondly, if you still want to own the car and not get a new one, you can simply pay the outstanding balance. This outstanding balance could be lower than the car’s market value by the time the lease ends, making it a valuable asset for you.
Thirdly, sale and leasebacks can often be more affordable in the long run as you will only be paying for the depreciation of the vehicle during the life of the lease. This means that your monthly payments could end up being much lower than if you had financed a car purchase using other methods such as a standard car loan (where you pay the incremental purchase price from your post-tax income).
Make getting your next car easi with easifleet
The team at Easi have over 20 years of experience in the industry of car leasing and car finance – meaning we can use our knowledge to deliver effective business car solutions every time. Our wide range of vehicle lease options come under flexible contract terms ranging from utes, to large SUVs, to hatchbacks and more.
For more information on sale and leaseback transactions - as well as other business car leasing options such as a novated lease - speak to one of our staff to see how we can use our skills as a premier novated lease provider help you!
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