Category: Blog

  AI has quickly gone from an emerging technology to a mature one, with its impact being felt in just about every industry. Much of the discussion around AI is eclipsed by anxiety and concern about the prospect of potential job losses, as experts fear the impact of AI’s often superior performance over human performance in many sectors.  

However, the conversation is evolving, and fear is slowly turning to deeper understanding and acceptance that, while AI will inevitably mean certain jobs will be more efficiently and cost-effectively carried out by machine-learning technology, in other sectors it will also lead to new jobs and resources being created and required in businesses. Furthermore, tech experts say that AI can potentially free up humans to do more strategic, higher-level work and augment many business functions.   

Humans will still have an important role in shaping and guiding the technology. Forbes magazine cuts through some of the confusion and moral panic around the ‘AI revolution’ and cites evidence for improvements to business: ‘revolution’ is actually a 60-year evolution of the use of increasingly sophisticated statistical analysis to assist in a wide variety of business decisions, actions, and transactions. It has been called ‘data mining’, ‘predictive analytics’ and, most recently, ‘data science’.  Last year, a survey of 30,000 American manufacturing establishments found that “productivity is significantly higher among plants that use predictive analytics”.  

Take the world of auto and equipment finance as a prime example: AI is already being adopted in the analysis and collection of data, creating a more streamlined, efficient and more user-friendly journey for the borrower and for brokers. After all, AI is simply learning from the data.  

How will AI benefit the end user exactly?  

Today’s consumers need speed and convenience in virtually every experience. They are busier, contend with more distractions and, as a result, are less willing to wait than in years past.  

In an increasingly competitive lending landscape, it is essential that lenders optimise decision-making for efficiency and effectiveness to better serve borrowers.    

Put simply, AI can enhance the customer experience in three main ways:  

• Make the customer journey easier and improve the customer experience
• Remove biases in decision making  
• Detect fraud.  

AI set to improve the customer journey at Metro 

Metro is moving forward at pace with its AI plans to improve the lending experience for its customers and brokers.   

The company has recently employed David Bridges in a newly created Chief Information Officer (CIO) role with an AI rollout forming a significant part of his remit. Other resources have also been deployed by Metro to formally progress the technological and AI transformation program of the company.  

David says: “Our plans to deploy AI into our systems will ultimately reduce the time and number of touchpoints for customer requests and processing, approvals and complaints.”

Metro will have a platform to collect more data, known in AI as a Large Language Model (LLM), to create a complete customer identity and profile that will create the streamlining and efficiencies across the lending processes.   

Metro’s Head of Servicing, Raj Kripal, says the company’s AI plans will lead to a more tailored approach to customer service.

“With the new LLM, we can tailor a response based on the data collected to build on our features and this will improve the novated leasing experience for customers. With this technology we can streamline credit assessment and complaints management.

“We are leveraging AI to recommend specific Metro products to make for a more personalised recommendation and to make life easier for our customers,” Raj says.

Why is Metro adopting AI?

Metro is going full steam ahead with AI because it sees the opportunity and potential for digital transformation to enhance the services it provides and to capture wider audiences. The obvious reason which has already been covered is the speed with which operations can be carried out through AI deployment. But there are other clear advantages.   

Research from the London School of Economics and Political Science shows the need for accelerated digital transformation by brands and organisations to meet Gen Y and Gen Z expectations. These cohorts display a lack of tolerance for slowness in communication, a frustration with legacy solutions and the inability to expediently source information.  

“We are actively targeting Gen Z with this technology, as we see AI’s appeal to younger audiences who increasingly seek a more automated, digitised approach to finance, and we want to capture more of that market,” Raj says. 

Metro emphasises that automation and digitisation and high-quality customer service are not mutually exclusive.

David says: “AI will enhance the SME experience, create a more tailored broker experience with innovation in operating systems, without replacing the human-to-human customer service experience – which is Metro’s major differentiator in the market.

“Leveraging AI for a speedier and more personalised customer journey is human-centric and that is at Metro’s core.” 

At Metro, as a leading provider of asset finance, consumer car loans and novated leases, we take pride in being a reliable, resourceful and innovative alternative to traditional bank lenders. We lend $1.5-2 billion per year through an Australia-wide network of specialist brokers and salary packagers. Our team drives this success and upholds the values that make Metro a great place to work and do business. We foster trust, open communication, collaboration and cross-training opportunities.

But don’t take our word for it. We would like to introduce four valued team members, who o explain why they came to Metro and stayed. From a career-driven credit analyst to innovative, people-centred Business Development Managers, and our ever-evolving social committee chair, these are some of the people who make Metro unique.

“Throughout my time at Metro, my managers supported me to develop my knowledge and skills. I’ve had opportunities to work on projects with other departments and attend Metro and industry events, sometimes interstate. Senior staff take the time to train you and generously share their knowledge. Managers want to see you succeed. “I want to keep learning and expand my lending knowledge to other market segments. My experience showed me that you need to seek out and take advantage of learning opportunities as they are not always made available to you.”

with stakeholders of higher seniority than me and I have had to learn stakeholder management from a different perspective. I get to know stakeholders’ interests, and their influence and impact for every project.

“I have since completed a short course in project management, which motivated me to strive for a Diploma of Project Management. I completed and passed my diploma in May, my next goal is to obtain a university degree and begin to lead my own projects at work.”

“Working at Metro has opened my eyes to a different career path. It motivated me to do further study, and as a side hustle I am the Social Committee Chair. I’ve moved offices and home at the same time, kept fit and ran my first 10km. Metro has a great culture. Management is supportive and there is opportunity for career progression.”  

“Innovation is one of the greatest challenges of the industry, with every finance company trying to outperform each other. Metro’s management team listens to key stakeholders and makes changes quickly in an evolving market. Being involved in building our consumer car loan product would have to be my greatest career achievement so far. It was a big and difficult task, but seeing the transformation from having no consumer product to having consistent consumer deals coming in each week has been rewarding. I get to be involved in so many great projects, some of which I could never have foreseen. I helped put together instructional videos for our brokers about the electronic document process and part of that was doing the voice overs and putting together marketing materials. “Every day is different. That’s what I love most about my role.”

“Finance and lending will always experience challenges because they are heavily aligned with economic conditions, but all you can do is all you can do. You need to be prepared to navigate the uncertain times and support your brokers and clients with consistent, competitive offerings.”

When you’re in the market for a new car, you’ll likely encounter various financing terms that may not be entirely clear. A common term that often comes up is ‘balloon payment’. While it might sound complex, it’s actually an important concept to grasp for anyone considering a car loan.

In simple terms, a balloon payment is a large sum due at the end of a car loan, after making smaller monthly payments throughout the loan term. This setup can make your monthly budgeting easier, but it’s crucial to be prepared for that final, larger payment.

In this article, we will explore the balloon payment car loan: what it is, how it affects your loan, and most importantly, how it fits into your financial planning.

What is a Balloon Payment?

In the context of a car loan, a balloon payment is a large payment due at the end of the loan’s term. Unlike traditional auto loans, where each instalment is the same, a balloon payment car loan will have smaller monthly payments. However, this comes with the catch of a much larger final payment.

Balloon payments vs regular loan payments

When financing a car, you generally have two main options: a traditional loan or a loan with a balloon payment. Before you decide whether you should pay a balloon payment on your car,  it’s important to understand the variations between balloon payments vs regular loan payments.

1. Payment Structure
   Regular Loan Payments: In a regular car loan, you pay back the principal amount plus interest in equal monthly instalments over the loan period. The loan is also fully amortised, meaning when all monthly repayments are paid back, the loan will be paid out. Balloon Payments: With a balloon payment car loan, you still pay monthly, but these payments are significantly lower than they would be with a regular loan. A large portion of the loan is then deferred to the final payment – the balloon payment.
2. Interest Rates
   Regular Loans: Typically, traditional car loans have fixed interest rates, meaning the interest rate remains constant throughout the loan term.
   Balloon Payments: A balloon payment car loan also typically has fixed interest rates, but the overall interest paid might be higher due to the structure of the loan.
3. Total Amount Paid
   Regular Loans: The total amount paid over the life of a regular loan is the sum of all monthly payments, which includes the principal and the interest.
   Balloon Payments: Although the monthly payments are lower, the final balloon payment can result in a higher total amount paid over the life of the loan when compared to regular loan payments.
4. Cash Flow Impact
   Regular Loans: These loans require a higher monthly outflow, which can be significant but is predictable and consistent.
   Balloon Payments: The lower monthly payments provide more immediate cash flow relief, but require careful planning for the large final payment.
   
5. End of Term Options
   Regular Loans: At the end of a regular loan term, the car is fully paid off, and the owner has no further financial obligations regarding the loan.
   Balloon Payments: At the end of the balloon payment loan term, you have the option to pay off the large final sum or refinance it.

How Balloon Payments Work

Imagine you’re financing a new car worth $20,000. With a traditional loan, you might pay this off in equal instalments over five years. With a balloon payment, you might pay smaller amounts each month, but at the end of the five years, you’re required to pay a lump sum, which might be as much as $8,000, to settle the loan. Understanding what the average balloon payment for a car is crucial for financial planning, as it gives you a ballpark figure to anticipate at the end of your loan term.

Benefits of Opting for a Balloon Payment

Are car balloon payments a good idea?

The answer to this question will vary greatly depending on your financial situation and goals.

Lower Monthly Payments

One of the most obvious benefits of a balloon payment is the lower monthly payments. The structure of the loan means that you pay significantly less each month compared to a regular car loan, which can be particularly advantageous for those who need to manage their monthly budget more tightly.

Flexibility in Budgeting

For individuals or families with fluctuating financial incomes, the flexibility of balloon payments can be extremely useful. With lower monthly outlays, you can easily allocate funds to other immediate financial needs or investments.

Access to More Expensive Vehicles

With the reduced monthly financial burden, a balloon payment structure can make more expensive vehicles accessible that may be out of reach with a standard loan structure.

Suitable for Short-Term Use

Balloon payments can be an excellent option for those who plan to use the car for a short period. If you anticipate a significant financial inflow in the future (like a bonus, inheritance or the sale of an asset), you can plan to clear the balloon payment with those funds.

Simplicity in Refinancing or Trading

At the end of the loan term, you have several options: pay off the balloon payment, refinance it, or trade in the vehicle. This flexibility can be particularly advantageous if you predict your financial situation will change.

Alignment with Financial Planning

For those with a clear financial plan, balloon payments can align well with specific goals or timelines. For example, if you know you will receive a lump sum at a certain point, like from a trust fund or retirement plan, you can time it with the balloon payment.

Risks of Opting for a Balloon Payment

While balloon payments can offer benefits, they also come with several risks that borrowers should carefully consider before choosing this type of financing.

Large Final Payment

The most significant risk associated with a balloon payment is the large sum due at the end of the loan term, which can be a substantial financial burden, especially if your financial situation changes unexpectedly. Failing to save adequately for this payment can lead to financial strain or the need to secure additional financing under potentially less favourable terms.

Higher Overall Cost

Balloon payment loans often can result in a higher total amount paid over the life of the loan. This is because, while the monthly payments are lower, the accumulated interest on the unpaid principal can result in more interest paid over time compared to a standard loan.

Risk of Negative Equity

There’s a risk of negative equity with balloon payments, especially if the car depreciates faster than you’re paying off the loan. Negative equity occurs when the value of the car is less than the amount owed, which can be problematic if you plan to sell or trade in the vehicle before the balloon payment is due.

Refinancing Uncertainties

If you plan to refinance the balloon payment at the end of the term, there is a risk that you may not get favourable terms. Refinancing options depend on various factors, including your credit score, interest rates at the time and overall market conditions.

Pressure on Future Finances

The need to make a large balloon payment can put significant pressure on your future finances. It requires careful planning and saving, which may not always be feasible due to unforeseen circumstances like a change in employment, health issues, or other financial emergencies.

Potential for Overextension

Opting for a balloon payment might lead to choosing a more expensive vehicle than what you can comfortably afford, based on the lower monthly payments. This can result in financial overextension, where too much of your income is tied up in debt repayment, leaving little room for other financial obligations or emergencies.

Balloon Payment Alternatives

The main alternative to balloon payments are fully amortised loans. This is a more traditional option where payments are structured to be made regularly over the term of the loan, eventually paying off the entire amount including interest.

How to Choose if a Balloon Payment is Right for You

Still unsure whether a balloon payment is the right option for you? Here are some key signs that may help determine whether a balloon payment is best for you:

• You want lower monthly payments
• You need more flexibility in your budget
• You are planning to own the vehicle for only a short period
• You are expecting a significant financial inflow (e.g. bonus or inheritance) to cover the large final payment
• You are confident in managing a larger payment at the end of the loan term.

Ready to Navigate Your Car Financing Options?

Take control of your car financing with Metro, where we specialise in personalised financing solutions that fit your lifestyle and budget. Whether you’re exploring balloon payments or seeking alternative financing methods, we can help you find the perfect match for your financing situation. Connect with a broker to start your journey towards smart car ownership with Metro.

There’s a noticeable buzz in the air for automotive enthusiasts in Australia. With the challenges of vehicle production delays and COVID-related shutdowns fading away in the rearview mirror, 2024 is gearing up to be a standout year. 

In 2023, electric vehicles (EVs) accounted for 8.4% of all new cars sales, a staggering 120% increase on 2022. The Electric Vehicle Council has estimated that there are now approximately 130,000 EVs on Australia’s roads.  As EVs continue to gain popularity, the Australian market is bracing for an influx of 34 new and innovative models set to hit the roads in 2024. 

While Tesla’s models have been the popular choice, more cars from brands like Volkswagen, Toyota, Polestar, BYD, and even Cadillac are joining the EV party, offering Aussies more choices, reshaping the perception and providing greater diversity and options for buyers.

New models in 2024

Selecting the right model might be a tough call with plenty of new cars hitting Australian roads this year. With an extensive range of options to choose from, it’s hard to know which one to finance or start saving for.

According to carsguide.com.au, here are some of new cars expected to arrive on our shores this year:

1. Toyota HiLux: Australia’s current best-selling model is set to get an upgrade with a 48-volt-assisted powertrain option that is anticipated to result in a 10% reduction in fuel consumption, making it ideal for fleet owners.
2. Lexus GX: Making its debut in Australia as a premium version of the Toyota Prado, this model is expected to be delivered in the first half of the year.
3. Jeep Avenger: Jeep’s first all-electric model, this is equipped with a 54kWh lithium-ion battery, offering a driving range of 400km.
4. Audi Q4 e-tron: This is expected to challenge Tesla’s Model Y and Volvo’s XC40.
5. Ford Mustang: Expected to arrive in the second half of the year, it’s anticipated to yet again become the best-selling sports car in Australia.
6. Kia Sportage Hybrid: Considered to be a compelling alternative to Toyota’s RAV4, this features a 1.6-litre turbo-petrol four-cylinder engine and a 44.2kW electric motor.
7. Mazda CX-80: While details are yet to be released, this model is expected to refine and enhance the features of the existing CX-60 and CX-90, aiming at Hyundai’s Palisade and Toyota’s Kluger.
8. Mitsubishi Triton: The all-time rival to Ford Ranger and Toyota Hilux has been refreshed, boasting a 3.5 tonne towing capacity.
9. SsangYong Torres: Entering the mid-size SUV market, it is hoped that the all-electric version will become available in Australia.
10. Kia EV5: This electric SUV is anticipated to become one of Australia’s most affordable EV.

Additionally, the Hyundai Ioniq 5 N is effectively challenging what we think about EVs by offering speed, affordability, and engaging driving experience. 

Comparative analysis: EV vs hybrid vs petrol

Making the right choice between models requires a thoughtful consideration of various factors, including technological advancements, performance metrics, cost-effectiveness, and environmental impact. While it’s essential to approach this decision rationally, your final choice should also align with your personal lifestyle.

The decision-making process involves striking a balance between the practical aspects of the vehicle and how well it fits into your daily life. Here is a summary of the key differences:

• EVs: More expensive upfront but cheaper to run, with lower maintenance costs and no road tax. Ideal for short to moderate daily commutes.
• Hybrids: Environmentally friendly with a combination of electric and fuel power, offering better fuel efficiency in everyday commutes, but peace of mind for the occasional longer distances.
• Petrol cars: Cheaper upfront, faster, and with widespread easy access to petrol stations. Ideal for commuters making unusually long journeys regularly.

While petrol cars maintain their popularity, EVs and hybrids represent the future. Interestingly, there are also currently around 12 different electric trucks available on the Australian market. This has sparked considerable interest among fleet owners, primarily driven by the technology’s potential to significantly reduce the total cost of ownership of heavy vehicle operations, and concurrently reduce emissions. As technology advances, more options are expected for both business owners and consumers.

Upgrade your driving experience

Whether you’re considering a fuel-efficient hybrid or an all-EV fleet for your business, Metro’s novated leasing options are designed to enhance accessibility. Also worthwhile to keep in mind is that the Australian Government introduced a fringe-benefit tax (FBT) exemption for EVs for private use, however, for plug-in hybrid vehicles this will only be available until 1 April 2025. This incentive is advantageous for those who can purchase an EV through salary sacrifice arrangements. 

With Metro, we put more Aussies in the driver’s seat to enjoy a sustainable and sophisticated driving experience.

The importance of optimising resources and enhancing employee satisfaction have never been more pronounced for businesses. Against this backdrop, novated leases have emerged as a unique and versatile vehicle financing arrangement that not only aligns with the fiscal wellbeing of businesses but also addresses the diverse needs of employees. But as all businesses are different, there still lies a critical question for employers to consider: is a novated lease worth it for my business?

In this article, we’ll explore the business novated lease benefits and considerations, so you can decide whether implementing a novated lease program is right for your business.

What is a novated lease?

A novated lease is a unique vehicle financing arrangement where an employee leases a vehicle and the associated operating costs are deducted from their pre-tax salary. This agreement involves three parties: the employer, the employee, and a finance company. The employee assumes the responsibility for the lease, including maintenance and running costs, while the employer facilitates the deductions.

How does a novated lease work?

Under a novated lease, the employer deducts lease payments and associated costs from the employee’s pre-tax salary. This reduces the employee’s taxable income, resulting in potential tax savings. The employee retains the flexibility to choose the vehicle and is responsible for its day-to-day expenses.

Benefits of novated leases for businesses

Novated lease employer benefits are extremely diverse, but obvious advantages include:

Tax savings

One of the most significant novated lease employer benefits is the potential for tax savings. By allowing employees to pay for their vehicle and associated expenses from their pre-tax income, both the employer and the employee can experience reduced taxable income. This not only results in potential tax benefits for individuals but can also contribute to the overall financial health of the business.

The tax savings extend beyond the individual employee to the employer, as the company may benefit from reduced payroll taxes.

Improved employee morale

Introducing novated leases as an employee benefit can have a positive impact on overall job satisfaction and morale. Employees value perks that enhance their work-life balance and well-being. The opportunity to lease a vehicle with associated tax benefits demonstrates a commitment from the employer to the holistic welfare of their workforce. By enhancing the employer’s reputation as a forward-thinking and employee-friendly organisation, novated leases can have a significant impact on improving talent attraction and retention.

Reduced administrative costs

Novated leases can streamline administrative processes for employers, particularly in the realm of fleet management. As employees take on the responsibility of managing their own vehicle-related expenses, businesses can experience a reduction in administrative overhead. This includes tasks related to tracking and managing company vehicles, processing reimbursement claims, and handling maintenance issues.

By offloading these responsibilities to employees, businesses can allocate resources more efficiently and focus on core operational activities. The reduction in administrative burden can be particularly beneficial for smaller businesses with limited administrative capacity.

Give employees access to a wider range of vehicles

Novated leases empower employees to choose vehicles that align with their preferences and lifestyle. Greater flexibility in vehicle selection can contribute significantly to employee satisfaction and retention. Employees will appreciate the ability to drive a car that suits their personal and professional needs, leading to a higher level of contentment in the workplace.

The access to a broader range of vehicles also allows employees to stay current with the latest advancements in automotive technology, eco-friendly technology and safety features. This can have indirect benefits for the employer, as employees driving modern and well-maintained vehicles may contribute to the overall image and professionalism of the business.

Is a novated lease right for my business?

Determining whether the business novated lease benefits are worth it for your business requires careful consideration of various factors.

Size and type of business

The size and nature of your business play a crucial role in determining the feasibility of implementing a novated lease program. Larger organisations with a diverse employee base may find it more manageable to administer and oversee such programs, as they often have more extensive resources and infrastructure in place.

Smaller businesses, on the other hand, may need to evaluate whether the potential benefits outweigh the administrative complexities involved. It’s also important to note that the type of business and its industry can influence the suitability of novated leases. For businesses that involve extensive travel or require a mobile workforce, the appeal of novated leases may be much more pronounced.

Employee needs

Understanding the preferences and needs of your employees is essential when considering novated leases. If your workforce values vehicle-related benefits, and if your business operations involve significant travel or transportation requirements, a novated lease may align well with the needs and expectations of your employees.

Conducting surveys or holding discussions with employees can provide valuable insights into their preferences regarding vehicle options, commuting preferences, and overall interest in participating in a novated lease program. By aligning the program with employee needs, businesses can maximise the positive impact of novated leases on employee satisfaction and retention.

Your budget

While novated leases definitely offer a wide range of benefits, it’s crucial to evaluate whether the associated costs align with your business’s overall budget and financial strategy. Consider the financial implications of offering novated leases, including the potential impact on cash flow and the ability to allocate resources to other critical areas of the business.

Businesses should conduct a thorough cost-benefit analysis to determine whether the tax savings, administrative efficiencies, and employee satisfaction outweigh the financial investment required to implement and maintain a novated lease program.

Navigating the road to business excellence with novated leases

When weighing novated lease pros and cons for businesses, it’s clear that they can be a valuable tool for enhancing employee benefits, streamlining operations, and potentially reducing costs. However, the decision to implement such a program should be tailored to the specific needs and circumstances of your business. This is where the importance of a tailored novated lease solution comes into play.If you’re ready to embark on implementing a novated lease program, contact your broker or get in touch with Metro, who can provide you with further information about our range of competitive novated leasing solutions.

Finance leases are a popular product option that can provide significant advantages to businesses. Whether you’re looking to acquire new equipment, vehicles, or other assets, finance leases offer a practical and accessible way to achieve your goals. But how does a finance lease work? And how do you know whether it’s the right commercial financing solution for your business?

In this complete guide to finance leases, we’ll walk you through the definition of finance leases, benefits, drawbacks, and the different types of finance leases available.

How do finance leases work?

At its core, a finance lease is an agreement that allows a business to use an asset for an extended period, typically the asset’s economic life, without bearing the full cost of ownership.

When a business decides to pursue a finance lease, they choose an asset they wish to acquire, which can include anything from machinery to vehicles. In this finance lease example, the business identifies a lessor, such as Metro, to provide the financing. The lessor purchases the asset and leases it to the business for an agreed-upon term.

During the lease term, the business makes regular payments, covering both the asset’s depreciation and the financing cost. At the end of the lease term, the business often has the option to purchase the asset at its residual value or continue leasing a new asset.

Benefits of finance leases

Finance leases offer a range of advantages for businesses, making them an attractive option for acquiring assets. Here are some key finance lease benefits:

• Improve Cash Flow: Finance leases require a lower initial cash outlay compared to an outright purchase, which frees up capital for other business needs.
• Access Latest Equipment: Businesses can more easily acquire the latest and most advanced equipment in their industry without large upfront investments.
• Tax Benefits: In many cases, finance lease payments are tax-deductible, which can provide potential tax advantages for businesses.

Flexible Terms: Finance lease terms can be tailored to match the asset’s expected economic life, ensuring flexibility and suitability for the business.

Finance lease process

Understanding the process of obtaining a finance lease is the first step for businesses considering this financing option. Here’s a step-by-step guide to how finance leases work:

Step 1: Choose an asset

Select the asset you need for your business operations. Assets can be anything from tertiary assets to more substantial investments such as light commercial vehicles, agricultural equipment or yellow goods. It’s crucial to evaluate your business requirements carefully and choose an asset that will enhance your operations and productivity.

Consider the following when selecting your asset:

• Relevance: Ensure that the chosen asset aligns with your business’s goals and needs. It should contribute to improved efficiency and profitability.

Lifecycle: Assess the expected economic life of the asset to determine the most suitable lease term.

Step 2: Find a lessor

Choosing the right lessor is a critical decision in the finance lease process. Look for a lessor with a proven track record in finance leasing and a reputation for reliability and transparency. Metro, for example, is a trusted name in the industry, offering tailored solutions to meet your unique business needs.

When researching and selecting a lessor, consider:

• Reputation: Investigate the lessor’s history, reviews, and customer testimonials to gauge their credibility and trustworthiness.
• Experience: Ensure that the lessor has experience in financing assets similar to the one you’re seeking.

Flexibility: Opt for a lessor who can tailor lease agreements to accommodate your specific business requirements.

Step 3: Negotiate a lease agreement

Once you’ve chosen your asset and selected a reputable lessor, it’s time to negotiate the lease agreement. This is a crucial step where you determine the terms and conditions that will govern your finance lease. Key points to address during negotiations include:

• Lease Period: Agree on the lease’s duration, considering the asset’s expected economic life, your business needs, and budget.
• Payment Schedule: Define the payment structure, including frequency (e.g., monthly or quarterly) and the amount of each instalment. Ensure it aligns with your cash flow.
• Additional Conditions: Discuss any specific conditions or requirements, such as maintenance responsibilities, insurance, or options for asset upgrades.
• Residual Value: Clarify the asset’s residual value at the end of the lease term, which is the amount you may need to pay to acquire the asset if you choose to do so.

Documentation: Review and finalise all necessary documentation, including the lease agreement and any associated paperwork.

Step 4: Make lease payments

Once the lease agreement is in place and all details are settled, it’s time to begin making regular lease payments. These payments typically cover both the depreciation of the asset and the financing cost. Making consistent and on-time payments is essential to ensure the smooth operation of your business.

Step 5: What happens at the end of the lease?

At the end of the lease term, you will have several options to consider:

• Purchase the Asset: You may choose to buy the asset at its residual value, taking full ownership of it.

Continue Leasing: Alternatively, you can opt to continue leasing the same asset if it still suits your business needs, or negotiate a new lease agreement for a different asset.

Accounting and tax implications of finance leases in Australia

Understanding the accounting and tax treatment of finance leases is essential as it can impact your business’s financial statements and tax deductions.

• On-Balance Sheet: Finance leases often require the asset to be recognized on the lessee’s balance sheet. This can affect financial ratios and financial statement presentation.
• Tax Deductions: Lease payments are typically tax-deductible expenses, reducing the lessee’s taxable income and potentially lowering their tax liability.

Is a finance lease not right for you?

While the various types of finance leases offer many advantages, they may not be the best fit for every business, so it’s important to consider any potential finance lease drawbacks. If finance leasing doesn’t align with your needs or circumstances, there are alternative financial products to consider, such as Commercial Loan or Chattel Mortgage (CM), which Metro also offers. 

Unlike a Finance Lease, a Commercial Loan gives you ownership right away and you then pay off the loan from the income the asset generates in your business. A Chattel Mortgage, meanwhile, is a financing option that allows you to take ownership of the asset immediately while financing the purchase through a mortgage arrangement.

Where do I start?

If you’re interested in exploring finance leases or other financing options, Metro is here to guide you. Our team of experts can help you assess your business’s specific needs and find the financing solution that best suits your requirements. Contact us today to get started.

In today’s competitive job market and challenging economic climate, job seekers often place salary and work-life balance at the top of their list when evaluating prospective employers. However, it has become increasingly clear that individuals seek more. They desire opportunities for growth, a sense of connection and community, and the chance to find genuine meaning and purpose in their work.

To gain a better understanding around this, at Metro, we initiated a research report in November 2022 by conducting internal employee focus groups, made up of demographic cross-sections as well as exit interviews from the past 12 months. The resulting insights revealed our company’s pioneering approach, our fostering of trust, open communication, collaboration and cross-training opportunities. Our commitment helped create a work environment where, considering the overall employee experience, Metro would be a great place to work. An overwhelming 98% of responses were favourable, 4% above the average when compared with other medium-sized businesses.

Reflecting our own results, an Employer Brand Research 2022 survey by recruitment company Randstad found that the top five most important criteria in Australia are work-life balance (chosen by 62% of respondents), attractive salary and benefits (58%), job security (56%), good training (53%), and a pleasant work atmosphere (51%). Additionally, Metro employees place emphasis on justice (97% of employees)—the extent to which management promotes inclusive behavior, avoids discrimination, and is fair—and leadership behavior (94% of employees) aligning with our company’s strategy and values.

At Metro, we have consciously prioritised meaningful work and career development, providing a unique approach when it comes to attracting and retaining top talent while enhancing employee satisfaction and retention. After all, the employer brand is Metro’s reputation and image as an employer and the value we offer employees.

While flexible work arrangements have taken centre stage to enhance the employee experience across industries due to COVID-19, at Metro, we go beyond embracing flexibility. Our culture encourages purchasing leave, greater career mobility, and facilitating lateral transfers without obstacles. Strong management support and regular meetings connect employees to our company’s broader mission, fostering a profound sense of purpose. And, of course, who can resist a well-stocked snack cupboard!

‘Meaningful work’ is not just a buzzword. Our employees experience empowerment without encountering roadblocks to their career ambitions. The ‘no politics and no hidden agenda’ philosophy creates an agile environment where employees say they receive genuine support from both our management and colleagues. This creates an environment in which taking ownership, making valuable contributions, and exercising autonomy are the norm. In turn, a culture of recognition is evident across our brand’s social media platforms, where internal promotions are celebrated regularly.

In Metro, employees are not just contributors; they are the driving force. This approach is echoed widely in a recent Quarterly Employment Market Update from recruiters MillerLeith:“While other technical skills are necessary, soft skills help employees collaborate effectively, communicate clearly, and adapt to changing situations. Soft skills such as problem-solving, empathy, emotional intelligence, leadership, and teamwork are valuable assets for any organisation. They promote a positive work environment and help create strong relationships with colleagues, customers, and stakeholders. Hiring for soft skills helps organisations build a more engaged and productive workforce, enhances the company’s reputation, and creates a culture of excellence”.

Employee feedback plays a pivotal role in shaping our unique employer brand. Employees feel “everyone’s voice is valued and heard,” they take charge of their careers, explore different paths, and align with their professional aspirations and desire to make a difference. This sets Metro apart as an employer of choice. Our company actively supports employee growth through engagement via onboarding and recognition programs, mentoring initiatives, wellbeing support, and training opportunities.

At Metro, our emphasis on career development is not solely about enhancing employee satisfaction; it is a strategic move that significantly contributes to the company’s overall growth. This alignment creates a dynamic and engaged workforce, enabling the company’s continued success in the ever-evolving financial services industry.

Our organisation is undeniably walking the talk, leading a cultural shift through our intentional actions and decisions. This holistic approach is at the core of our company’s strategic vision and unwavering commitment to our people. It is this shared journey towards success that Metro and we, the employees, are embarking on together.

Metro is an independent Australian non-bank lender specialising in auto and equipment finance for businesses, car finance for consumers, and novated leasing. Excelling in customer service and offering highly competitive rates, Metro (metrofin.com.au) is one of Australia’s most popular non-bank commercial asset finance lenders. Speak with a Metro broker today to explore the available options for your business.

 

[1] The Employer Brand Data and Analysis survey was conducted by Metro Finance in November 2022. The survey utilised the following data sources: 1) Internal focus groups comprised of current staff, featuring a diverse cross-section of demographics including age, role, tenure, level, and gender; 2) Exit interview reports from the past 12 months.

[2] From the independent survey with ‘Great Place To Work’ undertaken in February 2023.

[3] https://www.randstad.co.uk/s3fs-media/uk/public/2022-05/Randstad_REBR_UK_2022.pdf

[4] From the independent survey with ‘Great Place To Work’ undertaken in February 2023, based on focus areas with benchmark.

[5] https://www.millerleith.com.au/quarterly-employment-market-update-q1-2023/

[6] https://www.millerleith.com.au/quarterly-employment-market-update-q1-2023/

Having the right vehicles and equipment is vital to the success and longevity of any business, helping to maximise efficiency and productivity while maintaining a competitive edge.

However, funding the up-front purchase of expensive cars, trucks and other equipment is not always feasible. That’s why specialised finance for such assets is so popular. It enables businesses to put their new acquisitions to work immediately without draining their cash reserves or incurring the high interest rates of other credit options.

Below, we explore three of the most popular forms of business financing for capital assets.

Commercial Finance Agreements

Commercial Finance Agreements, also known as chattel mortgages, are a fast, flexible way to take ownership of assets such as cars, trucks, trailers, and other construction and earthmoving equipment.

A lender provides the funds to purchase the vehicle or equipment, and the borrower takes ownership at the time of purchase. The lender uses the asset financed as security, so interest rates on commercial financial agreements are usually significantly lower than those of unsecured facilities such as cash flow-based loans.

A range of terms are available, so repayments can be structured to suit each business’s unique needs. They are typically paid over 2 to 5 years, and can be set at a regular monthly amount, or customised to fit your unique cash flow requirements. A larger one-off balloon payment can also be set at the end of the term to help lower the regular instalment.

With a Commercial Finance Agreement, the lender pays the goods and services tax (GST) as part of the purchase cost, whereas the business which owns it is entitled to claim an input tax credit up front. The business can also claim interest and depreciation costs, depending on the extent to which the asset is used for business purposes.

Finance Leases

Finance Leases provide businesses with use cars and other vehicles, and equipment without taking ownership of them. In this form of business financing, a leasing company (referred to in legal terms as the lessor) buys the asset and gives the use of it to a business or person (the lessee) in return for regular payments.

Finance Leases typically run for 2 to 5 years and are widely used for vehicle finance. They are particularly suitable for businesses that use their vehicles primarily for business-related purposes and turn them over regularly, such as vehicle fleet companies.

Unlike a car loan, when a Finance Lease comes to an end, businesses may be presented with a range of options including renewing the lease, choosing to purchase it outright by making a final payment, or trading it in for a new model and continuing with a new lease agreement.

There are no annual or account-keeping fees associated with this finance option. Lease repayments for business vehicles are generally 100% tax deductible, GST on lease payments may be able to be claimed*, and it may be possible to make lease payments in advance for tax deduction purposes.

Novated Leases

Another alternative to a car loan is a Novated Lease, which instead of leasing vehicles to the business owner, enables employees to finance a new or used car by paying for it out of their pre-tax income. This is a tax-efficient form of salary packaging known as salary sacrificing.

This form of vehicle finance usually runs for 1 – 5 years, and is based on a three-way agreement whereby an employer agrees to make car lease payments to the finance company by deducting them from an employee’s salary. The vehicle may be used as part of a business arrangement, or it could be entirely for personal use.

For the employee, a Novated Lease can be a cost-effective way to secure the use of a car, not only because of the income tax savings but it can also include running costs such as fuel, servicing, registration, and car insurance in the repayments deducted from their pre-tax salary.

For the employer, it’s a low-risk way to help attract, retain and reward valued team members without the business having to take on new liabilities or manage a vehicle fleet. If the employee quits, the responsibility for making alternative arrangements with the finance company lies with the employee.

To learn more about the asset finance options available to your business, speak to an accredited Metro Finance broker today.

*Before making any investment decision, consider consulting your accountant or seeking independent financial advice.

 

Cash flow is the lifeblood of any business. It’s essential for day-to-day operations, and the key to long-term growth. So when investing in new assets, it makes sense for businesses to choose finance solutions that can minimise disruptions to their cash flow.

Rather than tying up large amounts of capital by paying cash up front for big-ticket items, businesses can instead use facilities such as commercial finance agreements and leases to secure the use of the vehicles and equipment they need, preserving their liquidity to meet expenses or take advantage of new opportunities as they arise.

Asset finance is also a great solution for businesses that have the potential to grow but don’t have enough cash on hand to fund an expansion. It allows them to take possession of new income-producing assets and put them to use generating returns immediately.
This form of business financing may also open the door to higher-quality equipment than a business can’t afford to pay cash for. Therefore avoiding the need to compromise on important features and enabling businesses to upgrade their assets to the latest models and technology more frequently.

Repayments are made over an extended period (typically 1 – 5 years), which more accurately reflects the useful life of the asset, instead of a lump-sum payment up front. Instalments can be fixed at the same monthly amount or can be structured to fit each business’s unique cash flow requirements, while a balloon payment can be set at the end of the term to lower regular monthly outgoings. Plus, repayments are usually partially or entirely tax-deductible.

One example of the finance solutions businesses can use to quickly take ownership of cars, trucks and other equipment and get moving without big cash outflows is a Commercial Finance Agreement. Also known as a chattel mortgage, this is a form of lending that can be used to acquire passenger and commercial vehicles, whether new or used and from a dealer or through private sale, as well as construction, earthmoving or other equipment.

An alternative to Commercial Finance Agreements is a Finance Lease. In this case, a finance company purchases and remains the legal owner of an asset, and then effectively rents it to a business for a regular payment over an agreed period.

At the end of the agreed lease period, there may be a wide range of options available to the business leasing the vehicle or other asset: they may choose to refinance it for another term, to take ownership (after paying any residual value) or to replace it with a new leased vehicle.

To learn more about the asset finance options available to your business, speak to an accredited Metro Finance broker today. Before making any investment decision, consider consulting to your accountant or seeking independent financial advice.