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Finance lease is a popular finance agreement for business and commercial
users where contract hire is not suitable. It provides an alternative
solution for businesses that want to handle the administration of their
vehicles and have the assets show on their balance sheet. On a finance
lease agreement, you can you choose to either pay the entire costs of the
vehicle, including any interest charges over an agreed lease period, or opt
to pay lower monthly rentals with a final payment based on the anticipated
resale value of the vehicle.
Finance lease is not available to private individuals, but is the preferred
option for partnerships, limited companies, self employed and sole traders,
due to the significant tax advantages. So, how does finance lease work?
Well, at the start of the contract, usage parameters for the vehicle are
agreed, and providing they do not vary, monthly payments and interest rates
are fixed for the duration of the contract.
A finance lease agreement offers many benefits. Firstly, monthly payments
are fixed for the duration of the contract. So, it's easy to keep track of
your money. You also don't have the financial strain of a high up-front
payment. For just a low upfront cost, you can use the assets immediately.
Up to 50 percent of the VAT payments can be reclaimed whilst non-VAT
registered businesses can choose to spread the VAT costs across the term of
the agreement by incorporating it into their monthly rental. You can also
benefit from a flexible repayment structure, structured to suit your cash flow.
At the end of the contract, the vehicle is either sold to a third party,
allowing the customer to benefit from any available equity, or the customer
can choose to pay the outstanding balloon payment and operate the vehicle
under a peppercorn agreement.
To find out more about finance lease, visit nationwidevehiclecontracts.co.uk and click
on our dedicated finance lease page. Or call Nationwide Vehicle Contracts
on 0844 482 9595.