With the cost of living biting harder and interest rates showing little sign of retreat in 2025, more Australians are weighing up whether to lease or buy everything from vehicles to business equipment. Leasing offers an alternative that balances flexibility, cash flow, and the ability to access the latest tech or vehicles without the burden of ownership. But is leasing always the smarter choice?
How Leasing Works in 2025: The Essentials
Leasing is essentially a long-term rental agreement. For a fixed period—often two to five years—you make regular payments to use an asset, like a car, solar system, or business equipment. At the end of the lease, you might hand it back, upgrade, or pay a residual to own it outright.
- Operating Lease: You use the asset, but ownership stays with the lender. At lease-end, return the asset or upgrade.
- Finance Lease: You cover most of the asset’s value over the lease term, with a residual payment if you want to keep it.
- Novated Lease: Popular with cars, your employer makes lease payments from your pre-tax salary, offering potential tax benefits.
In 2025, digital lease platforms have streamlined approvals, making it easier for individuals and businesses to compare options and sign online.
Leasing vs Buying: Financial and Tax Impacts
The lease-or-buy debate hinges on more than just monthly costs. Consider these 2025-specific factors:
- Cash Flow: Leasing avoids a large upfront payment, freeing up capital for other investments or business needs.
- Tax Treatment: Lease payments can often be claimed as business expenses, reducing taxable income. The federal government’s 2025 update to small business tax concessions has expanded instant asset write-off thresholds for purchased assets, but leases still offer a simpler deduction path for many.
- Depreciation: Owned assets can be depreciated, but this is more complex and may not suit rapidly depreciating tech or vehicles.
- Upgrading: Technology moves fast. Leasing lets you regularly upgrade to the latest models without being stuck with outdated assets.
Example: In 2025, a Sydney marketing agency leases a fleet of electric vehicles via a novated lease. The agency avoids a six-figure outlay, claims monthly payments as expenses, and upgrades to newer models at lease-end, keeping staff happy and the business green.
Policy Changes and Lease Trends to Watch in 2025
Several 2025 policy updates are reshaping the lease landscape:
- Electric Vehicle Incentives: The federal government’s EV rebate scheme, extended to include leases, means lower upfront and ongoing costs for both individuals and businesses leasing eligible EVs.
- Fringe Benefits Tax (FBT) Adjustments: In 2025, novated leases on zero-emissions vehicles remain exempt from FBT, making them more attractive for employees and employers alike.
- Small Business Support: The government has expanded access to equipment leasing for SMEs, including subsidised rates for green technology and priority processing for regional businesses.
On the ground, leasing is surging in popularity for solar systems and battery storage. With power prices still volatile, households and small businesses are locking in predictable costs via lease-to-own solar packages, often bundled with maintenance.
Risks and Considerations Before You Lease
Leasing is not a one-size-fits-all solution. Consider these before signing:
- Total Cost: Over a full lease term, you may pay more than if you purchased outright, especially if you keep the asset long after the lease ends.
- End-of-Lease Options: Read the fine print: will you face a balloon payment to keep the asset, or extra charges for wear and tear?
- Flexibility: Breaking a lease early can be expensive. Make sure the term matches your expected needs.
- Asset Use: For businesses, off-balance sheet leasing can improve borrowing capacity, but changes to accounting standards in 2025 mean more leases must now be disclosed, so check with your accountant.
Ultimately, the best choice depends on your financial goals, how quickly the asset depreciates, and your appetite for flexibility.
