Finance Lease

What is Finance Lease?

Finance Lease is a popular funding method for businesses needing commercial vehicles or vans where Contract Hire may not be suitable. Your business uses the vehicle while paying a rental – not a repayment – over a fixed term.

The monthly rental is based on:

• The initial cost of the vehicle (excluding VAT)

• The lease duration

• The residual value (estimated future value of the vehicle at the end of the term)

• Plus interest

Advantages of Finance Lease

• Minimal upfront capital required

• Fixed monthly rentals make budgeting easier

• Fixed interest rates are available on some contracts

• No end-of-contract damage recharges – you’re responsible for selling the vehicle

• Strong VAT recovery for VAT-registered businesses:

  • 50% VAT reclaim on the finance element for cars

  • 100% VAT reclaim on commercial vehicles (subject to no private use)

  • 100% VAT reclaim on the service element for maintenance-inclusive contracts

• Rentals can be offset against profits

• For cars with CO₂ emissions:

  • Above 130g/km: 15% of the rental is disallowed for tax

  • 130g/km or below: no disallowance

• Reduced administration

• Optional full maintenance and breakdown cover

• Optional GAP insurance for write-off protection

• Ongoing support from our team throughout your agreement

Disadvantages to Consider

• You’ll never own the vehicle – it must be sold to a third party at the end

• You carry the operating risk for the vehicle

• Interest rates may vary on some contracts

• Fully comprehensive insurance is required throughout the lease

More Information on Finance Lease

Although you don’t take ownership, a final payment equal to the residual value is required at the end of the lease.

In most cases:

• The vehicle is sold at the end of the term

• A proportion of the sale proceeds is returned to you (the lessee)

Finance Lease can also be tailored to suit your cash flow:

• Lower monthly rentals with a balloon payment at the end

• Or fully amortised rentals over the full term, often with a peppercorn (secondary) rental if you continue using the vehicle after the contract ends