Finance Lease

What is Finance Lease?

Finance Lease is a popular product for business customers such as limited companies, partnerships and sole traders/self employed (it's not available for private individuals). It offers the benefits of ownership because you can take advantage of equity build up in a vehicle (although you will not own the vehicle on a Finance Lease as the leasing company is the owner). VAT is only charged on the initial rental, monthly rentals and final rental/balloon, not the initial cost at purchase.

The vehicle or equipment is hired for a fixed monthly rental and you can sometimes include a final rental (or balloon) covering the estimated residual value of the vehicle (or equipment) at the end of the contract. You are responsible for disposing of the vehicle/equipment at the end of the contract. If the sale price is above the predetermined final rental (balloon) you will retain the equity, less a small charge from the leasing company. If the sale price is less than the final rental (balloon) then you will be liable to cover the shortfall. The final rental is calculated using the expected mileage in the vehicle over the contract.

With Finance Lease you may be able to finance up to 100% of the cost of a vehicle or equipment (subject to status), minimising any initial rental or deposit requirement. You can agree the monthly rentals at the outset for use of the vehicle over the term agreed and, at the end of the term, you have the option to carry on renting the vehicle for a nominal sum (known as a peppercorn rental) or to sell it and retain most of the proceeds (often referred to is a rebate of sale proceeds). Your cash flow will be eased as VAT is payable on the rentals only, not the cost of the asset.

If yours is a VAT registered company, you can reclaim between 50% and 100% of the VAT payments depending on whether you are leasing a car, commercial vehicle or equipment.

Your rentals can normally be offset against taxable profits (special rules apply to cars) and the vehicle or equipment is shown on your company balance sheet.

What are the benefits of Finance Lease?

Fixed payments for the whole agreement
Low up-front costs – for just a small outlay, you can use the assets immediately
Claim up to 50% of the VAT on cars and 100% on commercial vehicles and equipment (subject to being VAT registered)
Flexible repayment structure tailored to match your company’s cash flow
Tax advantages – VAT is payable on the rentals, not the purchase price, while payments can normally be offset against taxable profit (special rules apply to cars)
No penalty charges for additional mileage or damage at the end of the agreement (however the condition of the vehicle will affect its resale value)
Although you will not own the vehicle, you will receive most of the sale proceeds if the vehicle is sold to a third party at the end of the agreement (less a small fee the lender charges)

What else do I need to consider?

Risk of fluctuations in the used vehicle market which could be a problem if you have opted for a balloon payment and the value of your vehicle is less than this. It's important to estimate your annual mileage correctly at the beginning of the agreement so that the balloon figure is correct for the vehicles worth at the end.
Monthly rentals appear as a liability on balance sheet
There are operating risks associated with running the vehicle i.e Maintenance and servicing costs cannot be included
You cannot own the vehicle

Finally, like other agreements, failure to keep up with your repayments means that the vehicle or equipment could be repossessed by the lender which may then affect your credit score and ability to obtain finance in the future.

Rates from just 9.9% APR.
(The exact rate you will be offered will be based on your individual circumstances)

Representative APR 17.2%.

Representative example:

Borrowing £11,000 over 4 years with a representative APR of 17.2%, an annual interest rate of 17.2% (Fixed) and a deposit of £0.00, the amount payable would be £311.61 per month, with a total cost of credit of £3957.28 and a total amount payable of £14957.28.

Rates may differ as they are dependent on individual circumstances, the lender you are approved with and the vehicle/equipment purchased.

(Click here to find out what a Representative APR & example is)

Finance is subject to status.

Warning: Late payment may impact your credit file and the lender may reclaim the vehicle or equipment financed prior to the end of the term of the agreement.

Company Information
Proactive Vehicle Finance is a trading name of Proactive Vehicle & Equipment Finance Ltd, registered in England & Wales under company number 12688016. Registered office address: Whitfield Business Hub, 184-200 Pensby Road, Heswall, Wirral, CH60 7RJ. Proactive Vehicle & Equipment Finance Ltd is authorised and regulated by the Financial Conduct Authority under FRN 930768. You can check our registration via their website: https://register.fca.org.uk/ We are registered with the Information Commissioner's Office under ICO registration ZA787680 and our VAT registration number is GB362252907

We are a credit broker not a lender and can introduce you to a select number of finance providers who may be able to offer you a credit facility for your purchase. We will only introduce you to these lenders and we will receive a commission from the lender, calculated either as a percentage of the balance financed or a fixed amount, if you decide to enter into an agreement with them. The commission we receive from the lender will not impact the amount that our retail customers/consumers pay under an agreement but may impact the amount that our corporate customers pay under an agreement we arrange.
Finance is subject to status, terms & conditions and you must be a UK resident aged 18 or over in order to apply. Guarantees and indemnities may be required.
All calls are recorded for training and quality purposes.