Finance Lease
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Finance Lease is a flexible leasing option, much like Contract Hire it's based on a fixed contract period, set mileage and initial payment giving you a fixed monthly cost.
The vehicle is not returned to the funder though and needs to be sold to a third party at the end of the contract, this means there is no end of contract charges should the vehicle be damaged or over agreed mileage.
Most agreements have a final balloon payment due, this is set by the funder to be in line with the projected residual value, should the resale value be lower than the final payment due, you will be liable for the difference, should it be higher you will retain any profit.
A very popular way to lease commercial vehicles due to its flexibility and ability to negate end of contract charges associated with contract hire.
Advantages
- Flexible contract periods, normally 24 - 60 months.
- Potential to profit from reselling at end of agreement.
- VAT reclaimable on the rentals.
- Low initial outlay with flexible initial payment options.
- Option to have large final payment to keep monthly payments low.
- Finance Lease is an on balance sheet funding method.
Disadvantages
- You will not own the vehicle; you will need to resell to a third party.
- Fixed contract period, charges will apply if you want to exit the agreement early.
- There is an element of risk due to being financially resposbile for any loss on the future residual value.
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