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How does a finance lease work?

Posted by Tom Fogg - Tuesday, 14 Aug 2018 00:00

Finance Lease is ideal for customers who want the benefit of running a van with a low initial outlay followed by a low monthly rental. You simply have to agree an initial rental amount. This can be as little as your first months rental. 

Then you agree a monthly rental and contract period, which can include an acceptable final rental, often called a "Balloon" or "Terminal Rental". This will have the effect of keeping your monthly rentals to a minimum.

There is also an option called a full payout Finance Lease, this is simply a Lease with NO "Balloon" or "Terminal Rental" payment at the contract end.

WHAT ARE THE OPTIONS AT THE CONTRACT END? 

  • Part exchange the van back to Vehicles 4 Business, This is the most common option and the principal behind a lease agreement. We use the value of your van and offset this against the "Balloon" or "Terminal Rental" using the vans equity to pay off the "Balloon" or "Terminal Rental". This option will free you up to arrange a new Finance Lease Contract.
  • Pay off the "Balloon" or "Terminal Rental" and continue to use the van entering into a secondary term.

WHAT ARE THE BENEFITS?

  • The monthly rentals paid can be offset 100% against your pre-tax profits making it one of the most tax efficient ways of acquiring your new van.
  • Our Business approach is to ensure our advice is clear fair and not misleading.We aim at Vehicles 4 Business to give you honest, unbiased advice. Below we have listed for you the advantages and disadvantages of Finance Lease.

ADVANTAGES:

  • Minimum capital expenditure
  • Accurate monthly budgeting
  • No damage recharge as you are responsible for disposal of the vehicle
  • Finance lease is a very popular choice for VAT registered companies and businesses as they can claim back 50% of the VAT on the finance element for cars and generally 100% for commercials (subject to no private use). On contracts with maintenance the service element VAT is 100% recoverable
  • Reduced administration
  • On-going advice and support
  • Optional full maintenance package with breakdown rescue cover

DISADVANTAGES:

  • You will never own the vehicle as the vehicle must be sold to a third party as the end of the agreement
  • Operating risk associated with the vehicle
  • Interest rates can vary on some contract
  • You must have fully comprehensive vehicle insurance

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