Finance lease is popular for businesses users needing cars, vans and commercial vehicles. It offers flexibility and tax advantages to eligible companies who require one or more vehicles but don’t have the accessible funds to pay for them up front.
With a finance lease agreement you can choose to pay the entire cost of the vehicle, including interest charges, over an agreed period. Or, you can opt to pay lower monthly rentals with a final balloon payment based on the anticipated resale value of the vehicle, this balloon figure will be based on your anticiapted annual mileage.
This type of agreement is only available to business customers – including limited companies, self-employed people and sole traders; it is not available to private individuals. It is a particularly popular option for businesses because of the significant tax advantages.
Will it work for my business?
If you chooses to take out a finance lease through your company on a brand new vehicle, you will be hiring it for a set period of time (24, 36, 48 months etc) and make regular monthly payments to rent it.
If yours is a VAT registered company, you can reclaim up to 50% of the VAT payments. If your company is not VAT registered, you can choose to spread the VAT costs across the term of the lease by incorporating it into your monthly rental.
Will my company be eligible?
Finance lease is available to limited comanies, partnerships, sole traders and self-employed people who are financially able.
The key features of finance lease
- Allows your company to handle the administration of your vehicles, and have the assets show on your balance sheet.
- Choose to pay the entire cost of the vehicle, including any interest charges, on a monthly basis or Pay lower monthly instalments with a final balloon payment based on the resale value of the vehicle at the end, your annual mileage is needed to work this figure out.
- At the end of the agreement, the vehicle is either sold to a third party or you can pay the outstanding balloon payment and operate the vehicle under a peppercorn agreement.
The key benefits of finance leasing
- Fixed payments for the term of the agreement.
- Claim up to 50% of the VAT on cars and 100% on commercial vehicles (subject to being VAT registered).
- Fixed or variable interest options – you decide which suits you best.
- Tax advantages – VAT is payable on the rentals, not the purchase price, while payments can normally be offset against taxable profit (special rules apply to cars).
- No penalty charges for additional mileage or damage at the end of the agreement.
- Although you will not own the vehicle, you will receive 98% of the sale proceeds if the vehicle is sold to a third party at the end of the agreement.
The small print *
All offers are subject to change at any time, you must be 18 or over and finance is subject to status, vehicle availability and terms and conditions apply. We can introduce you to a limited number of finance companies, a commission may be received. Failure to maintain payments may result in termination of your agreement and the vehicle being returned, this could affect your credit rating and make it more difficult to obtain credit in the future.