FINANCE LEASE
Ideal for VAT 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.
WHAT IS FINANCE LEASE
Finance lease is a VAT-efficient method of vehicle finance that is usually accessed by VAT-registered businesses. A vehicle is purchased from a supplier but the business can then use this asset while paying an effective rental rather than a repayment.
The monthly rental is determined by the initial cost of the vehicle, the period of the finance lease and the residual value. Most finance lease companies will insist that you stick to a strict mileage limit as this mileage restriction is used to determine the final value.
You have full use of the vehicle during the finance lease period while never actually aquiring the vehicle. At the end of the finance lease contract a payment equivalent to the residual value is payable, normally the vehicle is sold and a proportion of the proceeds of the sale are returned to the lessee. Alternatively you could choose to pay the entire cost of the vehicle in monthly instalments.
BENEFITS OF FINANCE LEASE
ᐅ Low monthly costs and initial outlay
ᐅ Flexibility – Most finance lease companies will offer a number of payment options to suit your cash flow.
ᐅ Latest vehicles – You can gain access to the latest vehicles.
ᐅ VAT payments – Up to 50% of the VAT payments can be reclaimed.
ᐅ Balance sheet –Taking out a finance lease allows you to feature the vehicle on your balance sheet.
ᐅ Hire rental tax allowances can be applied for.
ᐅ Maintenance packages – These are often included in the finance lease meaning you don’t have to worry about the vehicle’s upkeep.
ᐅ Sales proceeds – You can boost your equity by receiving a proportion of the sale at the end of the finance lease term.
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