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Finance Lease Explained

September 5th, 2016

You hear the term quite often, but what is Finance Lease? How does it compare to other financing options?

Finance Lease is a tax-efficient funding solution. It’s similar to HP (Hire Purchase), but it allows you to get higher van discounts.

There are a few distinct advantages for Finance Lease…

  • 100% Tax efficient
  • Lowest initial cost
  • Low monthly payments (can be reduced by having a residual payment)
  • VAT is spread over each payment
  • Flexibility with ability to early settle and no damage or mileage penalties

Why is it tax efficient?

All payments are tax deductible against revenue—which can save you up to 40% off the cost of your vehicle.

Why are the initial costs so low?

Rather than paying 10% deposit plus full VAT (20%), you’ll only have to pay 3 payments down. You’ll only have to pay the VAT on that payment.

Why are the payments so low?

There are a few reasons for this.

  • Leasing discounts are higher—giving you a better deal
  • By having a residual, you are not paying the full cost of the vehicle over the period

How does it differ from Hire Purchase?

  • The VAT treatment which is spread rather than all upfront
  • The ownership lies with the funder—thus giving you the tax efficiency of a rental

What happens at the end?

  • You can sell the vehicle as an agent (you receive 97% of net proceeds less any loan outstanding)
  • You can keep vehicle on secondary rental (annual payment equal to normal monthly payment

How do I apply?

Similar to any finance you / the business is credit checked once you have requested us to proceed.

Still have questions about Finance Lease? Contact one of our van specialists

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