Finance Lease
Finance Lease is a leasing option available to businesses. It is particularly popular with van drivers as there are no damage re-charges.
Benefits of Finance Lease
Finance Lease is a flexible option which allows payment of the entire cost over an agreed period or lower monthly payments with a final 'balloon' payment.
The main points
- The vehicle will appear on the balance sheet as an asset
- VAT is recoverable on rentals (subject to certain restrictions)
- Rentals can be offset against profit
- There are no mileage restrictions. However excess mileage will effect a vehicles value at the end of the contract - be aware of 'unlimited mileage' deals.
- In today's economic climate we would advise you to be wary of Finance Lease agreements. As the balloon payment that you pay at the end of the contract may be more than the value of the vehicle (please contact us for guidance if you are unsure about this).
- You will receive road tax for the first year
What happens at the end of the lease?
At the end of the contract, you will have to pay a balloon payment. Once the balloon payment has been made there are two options available:
Option 1 - Continue to use the vehicle
A secondary rental (peppercorn rental) will be invoiced annually in advance. The peppercorn rental will be payable annually until you decide to sell the vehicle.
Option 2 - Not continue to use the vehicle
You sell the vehicle to a third party. Once sold, a copy of the sales invoice must be sent to the Finance Company together with 2% of the sales proceeds. You retain 98% of the sales proceeds.
Other leasing options
For information on other finance types (including Contract Hire, Contract Purchase and Lease Purchase), read our leasing finance pages.
Top tip - Take a look at our leasing finance comparison chart. This useful chart will help you compare leasing options at a glance.
Unsure which option is right for your business?
Then call us on 0845 052 5268 or send us an enquiry - We'll happily go through the different options with you.
