Finance Lease

Finance Lease for the Business User

Finance Lease is a tax efficient way in which to fund vehicles, it has similar VAT and Corporation Tax benefits to Contract Hire, but the responsibility and risk for the resale of the vehicle at the end of the term remains with you.

There are two main types of Finance Lease, one where you pay the entire cost of the vehicle, including funding charges over an agreed period or you can choose a lower monthly repayment with a final balloon payment which is based on the anticipated future value of the vehicle at the end of the lease period. Monthly payments and funding rates are fixed throughout the agreement, giving you the benefits of fixed monthly costs. The responsibility for resale at the end of the contract is yours and as such any risk or reward associated with the sale remains with you.

Key Benefits of Finance Lease

• Low Initial payments

• Monthly rentals are fixed

• Choice of a balloon payment to reduce monthly rentals

• Rentals can usually be offset against taxable profits

• Monthly rentals attract VAT.

Disadvantages of Finance Lease

• On balance sheet funding

• Only suitable for VAT registered businesses

• No option to return the vehicle.

• If taken with a balloon payment this must be paid at the end of the agreement.