As a REDEI customer, using financing options avoids having to find significant funds upfront for the purchase and installation of the energy system.
Finance is offered through a partnership with Verdia who offer Commercial loans/Chattel Mortgage, hire Purchase, Finance lease, Equipment Rental/ Operating lease.
It’s important to note that as with all financial decisions that you get independent advice from a qualified accountant about the tax and accounting implications of your chosen finance
Commercial loans/Chattel Mortgage
Under a commercial loan agreement, the customer sources, buys and owns the equipment and Westpac provides a loan for its purchase, which is secured against the equipment. Similar to a home mortgage, the bank takes a mortgage over the equipment and you pay it back in regular instalments. You may opt to have a ‘balloon payment’ at the end, or ‘straight amortising’ which is where you make regular payments all the way through. With a commercial loan or chattel mortgage product, you may be able to claim depreciation, running costs and interest paid, against your business income. You may also be able to claim the GST for the purchase on your following BAS statement.
With a hire purchase agreement, Westpac and the customer sign an agreement to purchase a piece of equipment over an agreed time period. Westpac gives the customer possession and use of the equipment but the equipment remains the property of the Bank until the final payment is made, when the ownership passes to the customer. You may opt to have a ‘balloon payment’ at the end, or ‘straight amortising’ which is where you make regular payments right to the end.
With a hire purchase product, you may be able to claim depreciation, running costs and interest paid, against your business income. You may also be able to claim the GST for the purchase on your next BAS statement.
With a finance lease, Westpac purchases the equipment at the customer’s request, and then rents it to the customer for an agreed period of time. At the end of the agreed period, the customer has the option to pay the residual amount if they want to keep and own the piece of equipment, or they can refinance. So, the main difference between a hire purchase and a finance lease is whether you definitely wish to own the piece of equipment at the end - or you are not sure. Typically, the term of a finance lease will be for most of the equipment’s useful life.
With a finance lease, the customer pays GST on each rental installment and on the final residual payment at the end (if you choose to pay it and own the equipment). Finance lease payments may be tax deductible.
Equipment Rental/ Operating lease
Also called an operating lease, equipment rental allows the customer to rent the equipment for an agreed period of time. At the end of the period, they can choose to extend the rental period; hand the equipment back; upgrade the equipment; or purchase the equipment. Similar to the finance lease, with an equipment rental/operating lease you do not own the equipment at the end of the term unless you arrange to purchase it.
With an operating lease/equipment rental, you may be able to arrange for maintenance costs to be included in your monthly payment. You may also be able to replace or upgrade your equipment at pre-determined times, so you can take advantage of the latest technology.
*Equipment rental/operating leases are usually treated as operational expenses rather than capital expenses, which suits some businesses for tax and accounting purposes.
Verdia Website and Finance Estimator link below
By investing in a renewable solution with REDEI, most business owners could make significant savings on energy costs, and get a long-term asset that improves business sustainability.
Call or email us to discuss your REDEI Finance Options today!