Finance Lease

If you want to maximize the use of an asset without the responsibility of owning it, a finance lease will give you the freedom and flexibility you need.

A finance lease is a form of asset finance whereby the leasing company, the “lessor”, buys and owns the asset that the customer, “the lessee”, requires. The lessee then hires the asset from the lessor and pays a rental over a pre-determined period for use of the asset.

The lessor will seek to recover the full cost of the asset, along with interest, over the primary agreement term. The lessee will have full use of the asset for its useful life, being responsible for its maintenance and insurance. The lessor claims the writing down allowances, whilst the lessee can claim both tax relief and VAT on the rentals paid.

At the end of the primary period there are three options available to the lessee:

  1. Enter into a secondary period where a nominal annual fee (peppercorn rental), usually equivalent to one month’s rental, becomes payable.
  2. Choose to sell the asset to an independent third party and receive the majority of the sale proceeds.
  3. Return the asset to the lessor.

 Benefits of leasing:

  • Low initial outlay – initial deposits can be as low as one monthly rental with the VAT spread over the term of the agreement.
  • Easy to budget – your financial commitment and monthly rentals are clearly defined from the outset.
  • Flexibility – the option to extend the agreement into a secondary period for a nominal annual fee (peppercorn rental).
  • Tax efficient – you pay VAT on the rental payments, not the purchase price. You can also normally offset your payments against your taxable profit.
  • Security – Finance Lease is secured on the asset so no additional security is normally required from you or your business.

To find out how we can help with your finance lease requirements please call us today.