Finance Lease Explained

Business Finance Lease (FL) is a traditional leasing method, where you pay a fixed monthly rental to suit the requirements of your business. An agreement can include a deferred final balloon payment, based on the anticipated value of the vehicle at contract end (according to estimated mileage), or the total cost can be spread across the contract period.

As the vehicle is not returned to the funder, it can be an attractive option over Business Contract Hire, in applications where the final condition, and/or mileage of the vehicle at contract end, might be uncertain. Sale to a 3rd-party is, ultimately, required, although it is possible to enter into a secondary rental agreement, paying a 'peppercorn' payment for each additional year's usage.

How does it work?

• Available on new cars and light commercial vehicles
• Duration between 18 - 60 months
• We will agree with you your estimated annual mileage and the amount of upfront initial payment you would like to pay; combined with the agreement duration, and the optional balloon payment, this will determine your monthly payments
• The optional final balloon payment is calculated on the anticipated value of the vehicle at the end of the primary lease period
• You sign an agreement, pay the deposit, and take receipt of the vehicle, your subsequent monthly payments thereafter being taken by direct debit
• Interest is included within your rental and fixed for the term of the agreement, which means you'll know exactly how much you will repay each month
• Towards the end of your agreement you will be reminded that the contract is nearing an end and any final balloon payment will be due
• You then have the choice of ending the agreement and selling the vehicle to an unconnected 3rd-party, or entering a secondary lease period with a 'peppercorn' rental, which is equal to one month's rental payable per year
• You cannot take ownership of the vehicle, but, at any point, you can sell the vehicle to an unconnected 3rd-party, to bring the term to an end, subject to settling any outstanding amounts
• We hope to've agreed a replacement renewal vehicle for you, enabling a seamless changeover

Features and Benefits

1. A fixed monthly payment, allowing you to budget with confidence
2. Record on balance sheet
3. Capital allowance can be claimed
4. Potential for profit on resale

VAT Registered

• You may be able to offset rental payments against taxable profits
• You can reclaim 100% of the VAT on the rental if the vehicle is used exclusively for business or 50% of VAT on the finance element of the rentals if the vehicle is also used privately.

If you want to know more about how Finance Lease can benefit your business, please contact our Business Centre Manager here at W R Davies Citroën, Phil Hendry, who can explain this and alternative funding options that are available.

p.hendry@wrdavies.co.uk
01785 275 007

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