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9th Dec 2019 - Give us a call today to see how we can put you in the driving seat of your dream vehicle!

Key Features of Finance Lease

Finance Lease is an agreement that offers the use of a vehicle to a business but without ownership. The main difference between this method of funding and Contract Hire is that the hirer takes on the risks and reward associated with re-marketing the vehicle at the end of the agreement.

The new vehicle is purchased by the funder and leased to the hirer based on the anticipated re-sale value of the vehicle at the end of the agreement (known as the ‘Estimated Sales Value’ or ‘ESV’), taking into account the age and predicted mileage of the vehicle. At the end of the agreement, the hirer can choose to extend the agreement, or to sell the vehicle to a third party – acting as sales agent for the funder.

Always speak with your accountant before deciding on the best form of fleet funding for your company as they will be able to advise on any tax implications based on your businesses’ own circumstances.

Features of Finance Lease:

  • No return conditions or excess mileage charges at the end of the agreement
  • More choice at the end of the agreement than Contract Hire
  • If the sold value is more than the Estimated Sales Value, the balance is kept by the hirer (less any fees due to the funder)
  • Optional maintenance saves you the cost of services, worn tyres and other maintenance
  • A proportion of the VAT element of the monthly rental can be claimed back 

Limitations of Finance Lease:

  • Finance Lease is only available to businesses
  • More exposure to market conditions and fluctuations than Contract Hire
  • If the sold value is less than the Estimated Sales Value, the hirer will have to make a final payment to the funder for the shortfall
  • The value of the vehicle and outstanding rental payments may be shown on the balance sheet
  • The hirer is responsible for the cost of Road Tax

To discuss leasing in more detail, call Lease Comparison now on 01442 920 920

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