Finance lease is becoming a very popular product with our clients. If offers the benefits of ownership through a leasing product by giving you the opportunity to build up equity in the asset. It can have a low initial rental up front and VAT is only payable on the initial rental, the monthly rentals and the final rental, not on the whole initial vehicle cost.
The asset is hired for a fixed monthly rental with a final rental covering the estimated residual value of the asset at the end of the contract. You are responsible for disposing of the asset at the end of the contract. If the sale price is above the predetermined final rental you will retain the equity, less a small charge from the leasing company. If the sale price is less than the final rental then you will be liable to cover the shortfall. The final rental is calculated using the expected condition and resale value of the asset.
With Finance Lease you may be able to finance up to 100% of the cost of an asset. You can agree the periodic rentals to be paid in return for the asset and, at the end of the term, you have the option to rent the asset for a nominal sum (known as a peppercorn rental) or to sell it and retain most of the proceeds. Your cash flow will be eased as VAT is payable on the rentals only, not the cost of the asset.
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