A tax-efficient, flexible option for VAT-registered organisations that can be applied to a vehicle lease in certain circumstances but is also available on plant and equipment.
It provides two ways of leasing the vehicle or asset over a fixed period, either:
Fully Amortised: paying the full cost of the vehicle plus interest charges, or
With Balloon: paying lower monthly rentals during the lease period, plus a final balloon payment based on the anticipated resale value of the vehicle.
At the end of the lease, the vehicle or asset is then sold to a third party and you receive a “rebate of rentals” equivalent to most of the resale value.
With a Fully Amortised lease, you may extend the agreement for a nominal “peppercorn” rental, but the business leasing the vehicle can never take ownership.
Finance Lease suits organisations or vehicles where Contract Hire is too restrictive. This could be due to exceptionally high or unpredictable mileage or vehicles undertaking heavier use whereby the customer understands the operational demands and takes the risk on resale value to avoid such issues. For example, it could be a more preferable funding method for customers operating vans working in harsh environments, such as heavy construction or quarrying, where the vehicle condition at the end of the lease would exceed “Fair Wear & Tear” criteria.
For cars and vans where the mileage is predictable, there is the option to incorporate servicing, tyres, brakes and general maintenance within the fixed monthly payment.
Benefits of Finance Lease
Minimum capital expenditure – invest in your business, not depreciating vehicles
Fixed interest rates
Leasing company recovers VAT on vehicle purchase, reducing costs
VAT recovery: usually 50% on the finance lease rental for cars and 100% on vans
Rentals are offset against taxable income for Corporation Tax
The option of fixed maintenance costs on cars and vans
Flexibility: no mileage or condition restrictions
Also available on plant & equipment, heavy commercial vehicles, trailers, bus and coach and other assets.