Finance Lease is a product available for businesses needing cars or commercial vehicles. These include Limited companies, Partnerships, Sole Traders and anyone else self Employed. It cannot be used for private vehicles.
There are two ways your Finance Lease can be set up. You either pay the full cost of the vehicle over the agreed term, or like a PCP agreement you can lower your monthly payments by having a balloon payment at the end of the contract. This amount will be set at the start and based on the anticipated value of the vehicle at this time. Also known as the Residual Value or ‘RV’.
At the end of the contract you can either sell the vehicle to a third party or alternatively, pay the outstanding balloon payment and operate the vehicle under a peppercorn agreement. Some funders will assist in sale/ disposal of the vehicle on your behalf.
The key benefits of finance leasing
With a finance lease, you are hiring the vehicle for a specified period of time, usually 2-4 years. It will be a lower upfront cost than buying and the asset will show on your company’s balance sheet. You will handle the administration of the vehicle.