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Finance Lease for Commercial Vehicles With LVS

Where Contract Hire cannot be offered, Finance Leasing is a popular funding alternative for acquiring commercial vehicles, vans or cars for the business.

In essence, your business gets the use of a vehicle(s) by paying a rental fee each month. The size of the rental depends on a number of factors.

  • initial purchase price of the vehicle (excluding VAT)
  • contracted period of the finance lease agreement
  • expected residual value (an estimate of the vehicle's value of t the end of the finance lease period, allowing for depreciation)
  • Interest charges

Advantages of Finance Leasing Arrangements:

  • Minimise your business' capital outlay
  • Keep accountants and auditors happy with predictable and accurate monthly budget forecasts
  • Some contracts allow for a fixed interest rate.
  • It is the lessee's responsibility to dispose of the vehicle so there's no damage / wear & tear recharge
  • There are VAT benefits too which account for finance lease's popularity with VAT registered businesses. 50% of the VAT payable on the finance portion of the rental for cars and usually it's  for commercials (strictly on condition of NO personal use). If your contract includes maintenance, 100% of the VAT on the service / maintenance element  can be reclaimed
  • Rentals are an expense you can offset against company profits. There is a 15% "disallowance" on the amount of rental that's claimable against the business' tax liabilities for cars emitting more than 130g per km of CO2
  • Less admin for your staff
  • On-going advice and support
  • Optional maintenance package
  • Optional breakdown rescue cover
  • Optional replacement vehicle cover in event of breakdown
  • Optional GAP insurance which provides cover for the shortfall between the outstanding finance and the insurance value if the vehicle is declared a write-off by your insurance company following an RTA or other incident

Disadvantages of Using a Finance Lease Arrangement:

  • You never get ownership of the vehicle because it is a legal requirement for the vehicle tobe sold to a 3rd party when the contract ends
  • You have to bear all the operating risks that come with running the vehicle
  • Interest rates are not necessarily fixed in these types of contract
  • Fully comp vehicle insurance is mandatory

More About Finance Lease Agreements:

Even though you can never own the vehicle, at the end of the contracted term the lessee has to make a payment to cover the residual value left in the vehicle.In practice, the  vehicle is normally sold and any excess from the proceeds of the sale are reimbursed to you, the lessee.

The finance lease companies in our panel have a range of payment options to suit almost any cash flow situation. Lower the monthly rentals with a larger balloon payment at contract's end, or pay the entire cost in monthly rentals (fully amortised Finance Lease), in this case it may be possible to continue the leasing arrangement with a "secondary rental" (referred to as a peppercorn rental).

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