A Finance Lease is a VAT-free method of financing a vehicle that is usually accessed by a VAT-registered business and companies as a whole.
They are usually offered to businesses where a moveable asset (the vehicle) is purchased from a supplier that the business can then use as an asset while paying a rental rather than a re-payment.
Benefits of Finance Lease
- Low monthly costs and low initial outlay
- Flexible choice of payments
- Access to the latest vehicles
- Up to 50% of the VAT payments can be reclaimed
- Vehicle can feature on your balance sheet
- Hire rental tax allowances can be applied for
- Maintenance packages usually included
- A proportion of the sale proceeds available at end of rental term
- The monthly rental is determined by the initial cost of the vehicle, the period of the finance lease and the residual value that is the estimated future value of the vehicle at the end of the finance lease period once depreciation is taken into account.
- Because residual value is used to calculate your monthly rental, most finance lease companies will insist that you stick to a strict mileage limit as this mileage restriction is used to determine the future value of the vehicle
- You have full use of the vehicle during the finance lease period.
- Although you never take ownership, at the end of the finance lease contract there will be a payment equivalent to the residual value that is payable. Usually this means that the vehicle is sold and a proportion of the proceeds of the sale are returned to yourselves.
- Alternatively, you could choose to pay the entire cost of the vehicle (plus interest) in monthly instalments.
- Some finance lease companies offer you the chance to extend the finance lease with a secondary rental agreement.
If you would like more assistance or would like to discuss any financing options available to you please call any member of our team on 01472 358 625.