Finance Lease

A flexible lease option with no mileage limits or damage recharges.

Finance Lease is perfect for registered companies who want to handle the administration of their vehicles, and have the asset shown on their balance sheet.

A VAT-beneficial option where the hirer can choose to pay the entire cost over the agreed lease period, plus an interest charge, or pay lower monthly rentals during the lease period with a final payment based on the anticipated resale value of the vehicle.

• Finance Lease is a method of financing a vehicle that is usually favoured for commercial vehicles and by VAT registered businesses
• The business obtains use of the vehicle by paying a rental each month
• The monthly rental is determined by the initial cost of the vehicle (excluding VAT), the period of the Finance Lease and the residual value (sometimes called the balloon payment), plus interest
• Although you never take ownership, at the end of the Finance Lease contract a Final Rental
(balloon) is payable
• Usually this means that the vehicle is sold and a proportion of the proceeds of the sale are returned to the lessee (In LeasePlan’s case, the customer receives 98% of the sales proceeds whilst LeasePlan
retain 2%)

Advantages

• Minimum capital expenditure
• Accurate monthly budgeting
• A fixed interest rate is available on all contracts
• No damage recharge as you are responsible for disposal of the vehicle
• VAT recovery on the lease rentals (subject to 50% block)
• Corporation tax relief available against the lease rental charges
• Rentals can be offset against the businesses profits.

Disadvantages

• You will never own the vehicle as you must sell it to a third party at the end of the agreement
• Operating risk associated with running the vehicle at the end of the contract
• Interest rates can vary on some contracts
• You must have fully comprehensive vehicle insurance
• The company will be tied into a fixed contract
• Exposure to residual value risk for the company