A finance lease is a VAT-free method of financing a vehicle that is usually accessed by VAT-registered businesses and companies.
It is offered to businesses where a moveable asset (the vehicle) is purchased from a supplier your business can then use this asset while paying an effective rental rather than a repayment.
Benefits of Finance Lease
- Low monthly costs and initial outlay
- Flexibility of payment options
- Latest vehicles
- Up to 50% of the VAT payments can be reclaimed
- Allows you to feature the vehicle on your balance sheet
- Hire rental tax allowances can be applied for
- Maintenance packages often included
- Proportion of the sale proceeds available at end of lease 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.
As a 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.
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 a payment equivalent to the residual value is payable.
Usually this means that the vehicle is sold and a proportion of the proceeds of the sale are returned to the leasee.
Alternatively you could choose to pay the entire cost of the vehicle (plus interest) in monthly instalments.
Some finance lease companies may offer you the chance to extend the finance lease with a secondary rental.
For a quotation, help, or advice contact your local dealership and ask to speak to one of our Business Managers at your local Evans Halshaw dealership