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What is Finance Leasing?

 

If contract hire isn’t a suitable option for your business, we also offer finance leasing, a common agreement for businesses requiring cars or commercial vehicles. Finance leasing is a flexible and cost-efficient way to use one or more vehicles whilst spreading VAT across all rental payments over the contracted period.

A finance lease is available for both new or nearly-new vehicles.

Business users can choose to pay the entire cost of the vehicle, including interest charges, over an agreed period, or pay lower monthly payments with final payment (sometimes known as a ‘balloon payment’) based on the expected resale value of the vehicle.

Finance leasing is a finance product only for business users, including self-employed people, sole traders and limited companies. Essentially, a business user takes a car or commercial vehicle for a predetermined period and an agreed maximum contract mileage with fixed monthly payments.

The agreement factors in a residual value based on the lease period and the anticipated annual mileage.  Similar to Business Contract Hire, the vehicle remains the property of the finance company during the period of the contract.

What are the key features of Finance Leasing?

• An excellent option for business users such as sole traders, self-employed people and limited companies if Business Contract Hire isn’t an available option

• Allows your company to control the administration of the vehicles, and have the assets show on your balance sheet

• Flexibility to pay the entire cost of the vehicle, including any interest charges, every month or pay lower monthly amounts with a final payment based on the resale value of the vehicle at the end of the contract

• You are responsible for the disposal of the vehicle at the end of the contract by either selling the vehicle or using the vehicle in part-exchange

• If the sale value of the vehicle exceeds the final balloon payment you obtain the equity (less a small charger from the finance provider). If the sale value of the vehicle is less than the final balloon payment you would be liable for any shortfall.

What are the benefits of Finance Leasing?

• Minimal Capital expenditure

• Low initial outlay, especially if not VAT registered

• Claim up to 50% of the VAT on cars and up to 100% on commercial vehicles (as long as you’re VAT registered)

• Tax advantages – VAT is payable on the rentals, not the purchase price, while payments can be offset against taxable profit (special rules apply to cars)

• Fixed Monthly Rental Costs for helping control your monthly budgeting

• Fixed or variable interest options

• The flexibility of using a balloon payment to reduce the monthly rentals if needed

• Lease periods from 24 months up to 60 months

• Ability to gain up to 100% of the vehicle sale equity at the end of the contract

• Initial rental – monthly rentals and final balloon payment are up to 100% tax-deductible

• No need for you or your business to be VAT Registered