Definition of a finance lease
“A Finance Lease is a means of renting a business asset through regular monthly payments. With a Finance Lease, the asset remains the property of the finance company even after the agreement has ended.”
If you rely on expensive equipment, vehicles or machinery to run your business, it can be hard to pay for them outright, especially if they need updating regularly. A finance lease lets you use the latest equipment and technology without draining your funds or using up cash reserves.
How a finance lease works
A Finance Lease is essentially a rental agreement – you pay a monthly sum for the use of an asset, whether it’s the latest computer equipment or a fleet of vehicles.
The lease will run for a fixed term, and as long as you keep payments up-to-date, you will have exclusive rights over the asset for the duration of this period. Unlike hire purchase, at the end of the term, ownership of the vehicle or equipment reverts to the lender.
Why choose a Finance Lease?
If your business relies on cutting-edge equipment or the latest IT technology, a Finance Lease is often the best option because at the end of the term, you can update your assets and enter into a new lease agreement for something that is more modern. Alternatively, if you are happy with the item you are leasing, you might want toenter into a new agreement and extend the term or offer you may even have the option to buy the asset in some cases.
A Finance Lease presents all the benefits of an upfront purchase but without the cost or commitment and is a popular type of asset finance.
If you choose a Finance Lease, the agreement usually carries some tax and VAT benefits for your business too. The monthly payment can usually be offset against your tax bill, and you can claim up to 100% of the VAT back on the asset if it is used exclusively within your business.
With all asset finance, the agreement is usually secured against the item itself, so don’t assume that you will struggle to obtain lease finance if you have a chequered financial past or your business is lacking a solid trading history. The leasing company will simply assess your circumstances to understand if you meet their lending criteria.
Whether you are running a gym and need to keep your equipment up-to-date, or operating a taxi firm that has to have the latest technology to maximise efficiency, lease finance is a great way of keeping your assets up to date without depleting your cash reserves.
A Finance Lease is ideal if you need high-value assets that need updating regularly and you are happy to deal with administrative responsibilities such as repair or insurance. Some of the solutions we have found include:
- Finance Lease for coaches
- Finance Lease for warehousing equipment