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Finance Lease

Finance Lease is a popular funding option for commercial vehicles where Contract Hire is not always suitable or the best option.

Finance Lease is a tax efficient option for funding where you choose to pay either the entire cost of the vehicle (known as fully amortised lease) including charges, over an agreed lease period or opt to pay lower monthly rentals with a final rental based on the anticipated resale value of the vehicle (residual value).

At the end of the contract there are a number of options available for you to choose from.

Option 1: Trade the vehicle in with us for a new one. A valuation would be offered depending on the vehicle condition and mileage completed. The amount offered would be used towards the settlement of the final rental and any proceeds of sale fee. Any equity would be returned to you and any shortfall payable by you.

Option 2: If you want to retain the vehicle for a further period, some funders offer a straight forward re-finance option. (contract extension)

Option 3: You can sell the vehicle to a third party and retain any equity after the final rental and any proceeds of sale fee from the funder have been paid.

Option 4: At the end of the agreement you can pay the final rental and retain the vehicle. The funder will charge a single annual secondary rental fee, until such time as the vehicle is sold. A sale of proceeds fee may then be payable to the funder.

Please be aware that there could be a shortfall at the end of the agreement. (The difference between the disposal value and the final rental) This would normally only occur if the annual mileage for the contract has been considerably exceeded or the vehicle has not been well looked after and disposed of with extensive mechanical or bodywork issues.


  • Minimum capital expenditure
  • Accurate monthly budgeting
  • No damage recharge as you are responsible for disposal of the vehicle
  • Finance lease has advantages for VAT registered companies and businesses as they can reclaim 50% of the VAT on the finance element for cars and up to 100% for commercial vehicles (subject to no private use). 100% of vat on the (optional) maintenance element of contract rental can be reclaimed.
  • Rentals can be offset against the businesses profits. Cars with a CO2 output above 130g/km are currently subject to a 15% disallowance on the amount of the rental that can be claimed against the businesses taxation, for cars with a CO2 output of 130g/km or below, there is currently no disallowance
  • Reduced administration
  • On-going advice and support
  • Optional full maintenance packages (dependant on funder)


  • You will never own the vehicle as the vehicle must be sold to a third party as the end of the agreement
  • Operating risk associated with the vehicle
  • There is a risk of a shortfall at the end of the agreement if the vehicle is not sold for a sufficient amount to settle the final rental.

More Information on Finance Lease:

Although you never take ownership, at the end of the finance lease contract a payment equivalent to the residual value is payable. Usually this means that the vehicle is sold and a proportion of the proceeds of the sale are returned to the lessee.

Most finance lease companies will offer a number of payment options to suit your cash flow. You can lower the monthly rental with a balloon payment at the end of the contract, or you can pay the entire cost in monthly rentals (normally referred to as a fully amortised Finance Lease), in which case you may be able to extend the finance lease with a secondary rental (sometimes called a peppercorn rental).

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