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Finance Lease

Finance Lease

Pure, tax efficient facility

Finance Lease is a popular funding option for commercial vehicles where Contract Hire is not suitable. (Cars can be financed as well)

Key customer benefits:

  • Our buying power helps the customer benefit from low monthly rentals
  • Monthly rentals can be decreased if a balloon rental is introduced at the end of the contract. This is set at the forecasted residual value or reduced in line with anticipated wear and tear on the used value
  • Although you do not own the vehicle you will receive 98% of the sale proceeds at the end of the contract. When a balloon has been introduced the proceeds of sale can be utilised to help clear the final rental
  • Available option to re-finance the balloon payment over a longer period of time.

What is Finance Lease?

This is a finance based product constructed in a similar way to contract hire, it can include a balloon or residual value but this must be settled at the end of the agreement or if requested it can be re-financed. Maintenance cannot be added to this type of contract. It appears on a company’s balance sheet as a “leased asset”.

The balloon amount is calculated on 95% of the future value based on term and mileage. The vehicle is registered in the Leasing Company’s name. The responsibility of all future Road Fund License is with you the customer and the vehicle is re-registered to you after 9 months.

At the end of the contract the vehicle must be sold to an unconnected third party or continued on a peppercorn rent. Road Fund Licence is provided for the first 12 months of the contract only

How does it work?

At the commencement of the contract, usage parameters for the vehicle are agreed, and assuming this does not vary, monthly payments and interest rates are fixed for the duration of the contract. You benefit though fixed costs but do take on the administration and operating risks. At the conclusion of the contract you can continue to operate the vehicle by paying a “peppercorn rent" although you will at no time take ownership of the asset.

Can I claim VAT on the rentals?

Customers are able to claim 50% of the VAT on cars & 100% on commercial vehicles (subject to being VAT registered).

What happens at the end on the Contract?

You have a number of options.

If you want to keep the vehicle on your balance sheet:

Balloon rental (If applicable) – You may wish to pay the Balloon Payment. The Balloon Rental is collected by Direct Debit Mandate. Once the Balloon rental is paid you can continue using the vehicle although you will not actually own it. The Leasing Company will maintain the agreement by invoicing you for a secondary ‘peppercorn’ rental amount paid annually in advance. The Leasing Company will continue to invoice for ‘peppercorn’ rental until you sell the vehicle and advises us of the sale.

Re-Finance (Balloon) for a further period - You may request refinance of the final rental for a further period. Just request a quote (subject to it being over £1200) from us for any period up to the vehicle reaching the age of 72 months. To arrange all documentation we require a minimum 28 days notice.

If you want to sell the vehicle:

Customer Sale – You must sell the vehicle as the Leasing Company’s appointed agent. It must be to a party that it not the Hirer of the vehicle, a related Company, a Partner, Director or members of their family. The Leasing Company will require a copy of the VAT sales invoice and 2% of the sales proceeds. You retain 98% as a rebate against the balloon rental.