Finance lease is similar to a contract hire lease in that the agreement lasts a set period of time and there are fixed monthly costs.
However, unlike a contract hire agreement, a finance lease allows you a number of different options at the end of the agreement.
You can choose to return the vehicle to the lease funder to be sold, sell the vehicle on behalf of the funder to a third party, or enter an agreed second lease paying a peppercorn rental.
Finance leasing involves a proportion of the vehicle, including interest and costs, being charged back over a fixed period of time with monthly payments.
As part of a finance lease agreement you can choose to pay either the entire cost of the vehicle, including interest, over the monthly payments or you can opt for lower monthly payments with a final balloon payment that is based on the anticipated resale value.
During the agreement the vehicle will remain the property of the lease funder however it will show as an asset on your balance sheet.
A VAT registered company can reclaim between 50% and 100% of the VAT paid on a finance lease, depending on whether it is a car or commercial vehicle, and your payments can normally also be offset against taxable profits.
Finance leasing is an option that is only open to businesses and we can help you decide whether it is the right choice for your fleet needs.