Finance Lease

Finance Lease

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What is a finance lease?

The most popular payment method with our customers, a finance lease is ideal for small businesses and sole traders who can’t pay the full cost of a van upfront. Some companies will also be eligible to reclaim any tax they have paid on their commercial vehicles if they are VAT-registered. The technicalities can be complicated to understand, so we’ll do our best to explain everything.

In a finance lease, the cost of the vehicle is spread out over an agreed period of time — usually 3-4 years — with fixed monthly payments. You can opt to include a balloon payment at the end of your contract, which can lower your monthly payments.

At the end of the agreement, you must sell the vehicle to a third party on behalf of the finance company. If the van is sold for more than the value of the final balloon payment, then you can benefit from the equity. This can allow you to get a new vehicle if you put the equity from the old van towards a lease on a new van. However, if the van is sold for less than the agreed residual value, you will be liable to cover this shortfall. 

It is also possible to buy the van back yourself from the third party at the end of the deal.

For businesses, a finance lease can be advantageous. Businesses gain control of a van during the hire agreement, using it as their own while having it on the books as an asset. However, the finance company remains the owner of the vehicle.

What is a balloon payment?

A balloon payment is a pre-agreed sum that is due at the end of a finance-lease deal. While a balloon payment usually enables you to have lower monthly payments during the agreement’s term, it is a sum of money that you must be able to pay off when the agreement is finished. Normally, the sale of the vehicle covers the balloon payment. However, if the van has excessive damage or milage, the resale value may be lower than expected. If what you gain from the sale of the vehicle is less than the balloon payment, you will be liable to pay the remainder.

Our sales team are experts on the finance lease, so they’ll be able to answer any further questions you may have. And of course, we have other van leasing options if a finance lease isn’t for you.

Advantages of a finance lease

  • Brand new vehicle
  • Low initial payment
  • Minimal capital expenditure
  • Accurate monthly budgeting with fixed monthly payments
  • Option of a balloon payment to lower monthly payments
  • Tax can be reclaimed on commercial vehicles* by VAT-registered businesses
  • You can keep most of the equity following the sale of the vehicle at the end of your contract

*A commercial vehicle is classed as a vehicle with a weight which is greater than 3.5 tonnes or that is capable of shifting a payload of over a tonne.

Disadvantages of a finance lease

  • You don’t own the vehicle
  • Operating costs are your responsibility
  • Fully comprehensive is the the only accepted level of insurance
  • There is a risk of negative equity should you request to settle the agreement early

7  Ways Of Van Finance  

Most of our competitors tend to be leasing franchises that all sell the same “specials” that tend to be basic vans purchased at the same time by the hundred. Often the vans you are offered have sat around a while. They tend to prefer contract hire as it locks you into them for some time.
We work via banks rather than by these franchises so we are not as tied in so can offer more of an array of van finance deals. This is why our vans are fresher and  deals better. There is no leasing franchise taking a cut.
All methods are tax deductible. All methods you should really have GAP Insurance Policy in case the vehicle is written off. Many commercial insurance policies will not pay new for old.

  1. Hire purchase – VAT down or VAT deferred . HP is a great way to actually buy a van. If your VAT registered claim the whole VAT amount back within three months.   Click Here.
  2. Contract Hire – This is more popular on cars than vans. Many customers think there is no credit check but there is. Its better for large fleets and doesn’t offer any advantage for less than fleets of 10. If you want to change over 10 vehicles in one go and they are basic then please get in touch. Click here for contract hire.
  3.  Lease purchase. Not always the best deal as some manufacturers offer discounts  that cannot be used on lease purchase. Its just like HP but with a final payment and once it’s paid you get automatic ownership. It’s better once again for VAT registered businesses especially if you want a T6.1 for example to keep at the end and convert to a motorhome. Sometimes a pre registered van is cheaper. Click here
  4. Finance Lease – By far the most popular method as it attracts the lowest payments . It’s gets the largest discounts from manufacturers same as contract hire. However you can fit accessories many of which you cant n contract hire
  5. Operational Lease – Is just like finance lease however you can hand back the vehicle at the end. Some of our Mercedes vans are like this
  6. Asset Finance – We can finance many products not just vans
  7. Credit Limit – Pre approve your van purchases 90 days in advance. Useful  for example if you have a contract tender.

GAP Insurance

If you write a vehicle off in say year one the insurance company may well pay you less than the settlement value. Thus through no fault of your own you may need to buy a older cheaper van to reach the same monthly payment. Click Here to buy a GAP Policy

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