A Finance Lease offers similar payment and VAT reclamation terms to Contract Hire. The vehicle remains the property of the finance company throughout and can either be fully written down over the contract period or a 'balloon' payment can be agreed prior to entering the contract. When the Transit is sold or traded you would receive approximately 90% of the proceeds of the sale.
A Finance Lease is very similar to Contract Hire, however at the end of the contract the business may be liable for a further payment. This happens when upon completion the vehicle sells for less than the anticipated amount and the business has to pay the difference.
Mileage over the limit set in a contract-hire arrangement will incur additional costs and if the business expects a very high mileage then accepting some risk in the eventual value of the vehicle may be preferable to accepting the automatic additional mileage costs in a contract-hire arrangement.
The cost of the vehicle can be stated directly against income to decrease taxes, and there is no need to place the vehicle on the balance sheet and use capital allowances for tax relief . The VAT element is fully recoverable.
This is most suitable for businesses who incur a high annual mileage or a high degree of wear and tear. The accounting and VAT implications can vary depending on your company's circumstances (partnership, sole trader…) and you should clarify how your accountant would treat the vehicle (on/off balance sheet, etc.).
Choosing the most cost-effective method of funding a vehicle for your business can be a daunting task. Our Transit Centre advisors listen to your needs and take into account your situation before recommending a funding option for you. Please call one of our team today for impartial, practical advice about financing your vehicle. We are here to help and find solutions that work for both you and your business.