A finance lease or "full-payout lease" is a contract under which you commit to payment over a period of time (the "Primary Lease Period") of specified sums to repay in total the capital cost of the vehicle or asset together with the our interest charges.

A typical finance lease will last from two to five years. At the end of the Primary Lease Period, the lease will typically go into a Secondary Lease Period during which you pay secondary rentals for continued use of the vehicle or asset. Alternatively we will appoint you as our agent to sell the vehicle or asset. You are responsible for maintenance and insurance of the vehicle or asset.

We retain ownership of the vehicle or asset throughout both Lease Periods and are therefore able to claim capital allowances on the Equipment and pass on any benefit to you. 

We pay the initial VAT on the cost of the vehicle or asset. You pay VAT on the lease rentals payable and, provided you are VAT registered can claim these back from HM Revenue & Customs. If you are a business customer, you can generally deduct the full cost of lease rentals from taxable income, as a trading expense.

From an accounting point of view, the vehicle or asset is shown on your balance sheet as an asset and is depreciated accordingly. The finance lease obligations are shown as a creditor in current and non-current liabilities in your balance sheet.

Benefits

• Preserves cash and credit lines for other uses
• Fixed monthly payments
• Matches payments to the life of the vehicle or asset, thereby easing cashflow
• No need to pay the VAT on the cost of the equipment up front
• Rentals are an allowable expense against your assessment of Corporation Tax
• Typically lease rentals are lower than Hire Purchase payments because we can factor in the benefit of capital allowances.