Finance Lease

Introduction

A popular, flexible method of funding a broad spread of business assets. The financial company's finance lease offers all the practical benefits of ownership without any of the potential burdens.

Key features and benefits

• The flexible repayment structure gives immediate and full use of the asset for a minimal outlay.

• Rentals can be set according to the customers cash flow - especially beneficial if the business is seasonal.

• Fixed or variable interest rate - the customer makes their own assessment and chooses accordingly.

• Rentals can normally be offset against taxable profit. Asset treated as 'on-balance sheet'.

• VAT is paid on the rentals not the purchase price.

• The finance company, as owner of the asset, claims writing down allowances, and these are reflected in the rentals.

Typical assets: Virtually all types of vehicles and business equipment. Special rules apply to company cars.

Frequently Asked Questions

Can the customer claim any tax allowances?

As owners, the finance company claims appropiate writing down allowances and these are reflected in the rentals. Customers should be able to offset the rentals against taxable profits, normally over the same period as their agreed depreciation policy. If in doubt, customers should consult their auditors.

Can they claim the VAT charged on the rentals?

Providing they are registered for VAT, they can normally claim the VAT payable on the rentals. Special rules apply to company cars.

What if the asset is lost, stolen, damaged or destroyed or becomes subject to a total loss claim during the period of the lease?

The customer is responsible for the asset and for any outstanding balance on the agreement. Comprehensive insurance, covering at least the full replacement cost of the asset is therefore vital.

Who is reponsible for servicing and repair?

Unless the customer has servicing and maintenance built into the agreement, they are reponsible for maintaining the asset in good condition. If they fit any replacement or additional parts to the asset, they become the property of the finance company.

When the asset is sold at the end of the lease, can the customer introduce their own buyer?

In most cases the finance company would prefer the customers to introduce a buyer, and if a deal is acceptable to both parties, the finance company will raise a sales invoice accordingly.

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