Finance Lease has become an increasingly popular method of financing your vehicle, particularly in situations where contract hire is not suitable. Finance lease arrangements are not available to Private Individuals but it is the preferred option with many Partnerships, Limited Companies, Self-Employed and Sole Traders, due to there being substantial tax benefits.
With a Finance Lease agreement, there are usually two different options available to you:
Following either of these scenarios, the vehicle is sold and 98% of the sale proceeds will be returned to you.
Please be aware that in a Finance Lease agreement you never actually own the vehicle. At the end of the lease agreement, the balloon payment is given to the finance company and the vehicle is later sold to a third party.
At the beginning of the Finance Lease agreement, fair usage limits are agreed for the vehicle and, providing these parameters do not vary, monthly payments (including interest charges) are set for the duration of the contract.
This means that you can take advantage of a fixed monthly rate without the stress that comes with operating risks and administration.
Here is an example of how a Finance Lease agreement works:
Example.com set up a Finance Lease agreement on a BMW 5 Series. Example.com will pay a deposit on the car, and then a choice is made on whether to make fixed monthly payments across the length of the contract or to make a “balloon payment” at the end of the lease.
Finance Lease, as a vehicle funding option, does have a number of benefits:
With Finance Lease agreements, there are several things that you need to know before you sign the paperwork: