Finance Lease is different to Hire Purchase. As one of the most popular finance tools in today’s modern business world, it is used to leverage assets. It is primarily a method used for raising finance to pay for assets, rather than a genuine rental.
Initially when an asset is purchased, you will only pay the VAT element on the deposit / initial rental that you put down. The finance house will pay the remainder of the VAT on the purchase price.
Your monthly repayments are for a fixed period and generally a fixed rate. However, your monthly repayments will attract VAT, which you reclaim in your Quarterly / Monthly VAT return.
You may be able to finance up to 100% of the purchase price of an asset with Finance Lease. This then minimising any deposit or capital expenditure on your behalf.
You can agree the periodic rentals to be paid in return for the asset. Your cashflow will be eased as VAT is payable on the rentals only, not the purchase cost of the asset.
However, at the end of the ‘primary period’, you have various options:
• Sell the goods to an independent third party and will be offered the majority of the sale proceeds. (Sale price must be agreed with the finance house)
• Enter into a Secondary Rental Period and generally pay 1* monthly rental on an annual basis and never own the goods. (*Secondary Rental Period varies with different finance houses. The star denotes that it is not always 1 rental.)
• Return the asset to the finance company.
Unsure about Finance Lease?
If you’re unsure how Finance Leasing can be beneficial for your business, then call us today to discuss your requirements. We can inform you of all our asset finance options and together, can come up with a solution to best suit your business needs.