How does finance lease work?

With finance lease, your business will have use of a new vehicle and in return, you pay a fixed monthly payment for the term of the agreed lease (two to five years). This funding method enables you to pay either the entire cost of the vehicle, including interest charges, over the contract, or you can pay lower monthly rentals with a final payment at the end.

At the start of the contract, you will pay an agreed initial rental and agree on usage parameters for the vehicle. This, along with the vehicle’s residual value set by the finance company, help to determine your monthly payments and the final payment (if applicable). During the lease period, the vehicle remains registered to the finance company and so is their property.

If your business is VAT registered, you can benefit from tax breaks on your finance lease agreement. The payments attract VAT, so this means you’ll be able to claim 50% of the VAT back on your initial and monthly payments. If the leased car is used exclusively for business use, then 100% VAT payable can be reclaimed. In any event, 100% of the VAT charged on any maintenance payment is reclaimable. Also, rental paid on a finance lease agreement are tax allowable. Non-VAT registered companies can still qualify for a finance lease, although VAT can’t be reclaimed.

Furthermore, there are no restrictions on mileage with finance lease. However, it’s important to note that significantly exceeding your agreed mileage for the term, will lower the vehicle’s value and so could result in negative equity.

At the end of the finance lease agreement, there are two options available. You can:

• Dispose of the vehicle to a 3rd party - any equity is yours to keep, or;

• Pay the final ‘balloon’ payment (if applicable) and keep the vehicle. The lease agreement will then enter a secondary rental period with an annual peppercorn rental until the vehicle is disposed of.

What are the advantages of finance lease?

• Finance lease offers a flexible contract of up to 5 years to reduce monthly outlay. Also, a flexible initial rental and payment profiles available to suit you.

• Competitive maintenance contracts and servicing packages available as an added cost.

• No strict mileage or damage recharge implications at contract termination.

• Fixed monthly rentals allow for budgeting costs.

• Option to terminate early at any time on payment of settlement figure & disposal to a 3rd party.

• Road fund licence included for first 12 months then funder arranges and recharges you by direct debit.

• If desired, there is the option to keep the vehicle after the primary lease period via a secondary lease period with an annual peppercorn rental.

Points to consider with finance lease

• No option to purchase or own the vehicle at any time.

• Risk of vehicle depreciation lies with the customer. Depending on the used vehicle market and when you decide to dispose of it, could result in positive or negative equity.

• Vehicle must be serviced and maintained in accordance with the manufacturer's terms at your expense (unless a maintenance option is taken).

• Any parking, congestion and other fines are rechargeable and may incur an additional charge.

• If you choose to terminate the contract early there may be a balance to pay if the vehicle value is less than the settlement figure.

Why Choose GB Vehicle Leasing?

GB Vehicle Leasing is quickly becoming the fastest growing leasing company and customer satisfaction is at the core of everything we do. With over 650 genuine customer reviews, you can be sure your vehicle is supplied by a company you can trust. If you haven’t already, take a look at our independent customer reviews on Trustpilot.

As a reputable leasing broker, we offer bespoke and competitive quotes to suit your requirements. Also, at GB Vehicle Leasing the customer service experience doesn’t end at delivery of your vehicle, so we offer after sales support for the life of your contract.