Is leasing or buying a tractor cheaper in today dollars?
It depends on five things: the lease payment against the loan repayment, the residual against the machine's value at the end, the GST credit timing, the deduction timing under your effective life, and your private use. Buying ends with an asset, leasing with a residual, so both belong in the comparison.
How do you use this in your decision?
Put your own quote, loan terms and lease terms into the sheet on the home page. It shows the three options in today dollars, the deduction timing year by year, the GST credit quarter and the machine's value at the end, then names the cheapest on your figures and by how much. Every rate, residual and effective life is labelled an assumption for your accountant.
Which rules sit behind the tax treatment?
The tax treatment of the decision is the work of a registered tax agent. See the rules that apply to you for the held obligations under the Tax Agent Services Act 2009 (Cth), cited to their clauses.
Frequently asked questions
Can the sheet answer this for my farm?
Yes, once you paste your own figures. The sheet does not carry a house view on lease against buy: it builds both on the quote, the bank terms and the dealer lease terms you paste, then names the cheaper in today dollars and by how much.
What changes the answer most?
The rate, the residual and the machine's value at the end of the horizon. The sheet shows a rate sensitivity a couple of points up so you can see whether a small move in the rate changes which option is cheapest.
Related answers
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- What discount rate should I use in a machinery comparison?
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