Leases Asset Leasing Asset Finance lending

Interest Rates Are Going up but Lease Rates Won’t!

By Stefan Iggo Aug 31, 2021 7:22:38 AM
image alt Interest Rates Are Going up but Lease Rates Won’t!

Ironically, as most of Australia and New Zealand sit in lockdown both Reserve Banks have openly stated that interest rates will rise soon. For any business this will result in an increased cost of operations. In a recent webinar by Jason Wong of the BNZ, the BNZ's latest estimates show as much as a 2% increase by the end of 2022. Any way you look at this there is going to be an increased cost of funding, and in fact many of the banks are already starting to price this increase into their swap rates and your mortgage rates.

BNZ OCR graph

What you may not fully appreciate is that with any “operating lease” once you commit to the rental schedule you are effectively locking in the interest rate for the total period of the lease. The interest cost is fixed from inception.

So, the lease vs buy decision has changed considerably, as any straight debt cost could increase by as much as 2% over the coming year or so. Combine this with the COVID impact of working from home and ensuring your staff have the best technology to be as efficient as possible, and suddenly there are certain business assets that really should only ever be leased. There is a very real reason why Australasia’s biggest corporates lease all their IT and fleet. Not only does it ensure you have tools fit for the job, but in this environment it’s even more economically efficient than usual.

Don’t be left behind with old legacy operating equipment, call us and we can help you get the right tools for the job for the best possible cost.

Contact us - Quadrent