A very popular and attractive leasing option with fixed repayments. Like Hire Purchase, the funding period is fixed over a set period of time, in case 2 - 5 years, and your repayments also cover the full cost of the asset. At the end of the agreement you have a couple of options;

1. You may request that the asset be sold to a 3rd party. Any funds raised from this sale are yours to keep.
2. You can ask for a secondary lease period, where you will agree an annual fee with the finance company to continue using the asset.

Finance Lease usually has a smaller initial outlay than some other options as the VAT is only payable on the initial rental, the monthly rentals and the final rental, not on the whole initial asset cost.

Benefits

• Fixed monthly rentals
• Flexibility of contract length from 24 to 60 months
• Opportunity to carry on using the vehicle at the end of the contract period
• No condition or mileage penalties at the end of lease
• No need to be VAT registered
• You retain most of the equity built up in the asset over the length of the agreement
• Monthly rentals are up to 100% tax deductible

Potential Risks

• Monthly rentals will appear on the balance sheet as a liability
• You have no option to own the vehicle
• If you have opted for a final rental at the end of the agreement this is very dependent on market conditions and values at the time of disposal

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