Finance Lease (F.L.) works in a similar way to a contract hire agreement, but there is rarely an option to take up a maintenance contract. A Finance Lease is a contract based upon a pre-agreed period and simply finances the acquisition of a vehicle. The capital cost is spread over the term and typically incorporates a final payment based upon the predicted resale value determined by the anticipated annual mileage. VAT on the original purchase price is reclaimed by the Funder, which allows the monthly costs to be reduced to reflect the VAT saving. Finance Leases can be terminated early and allow greater flexibility although depreciation risk remains with you. The vehicle is sold to a third party at contract termination and provides the opportunity for you to benefit from any available equity.

Benefits of vehicle lease back schemes:

• The leasing company is able to reclaim all the VAT on the purchase price of the vehicles, which is reflected in much lower monthly payments to the customer
• Fixed monthly payments for the duration of the contract help planning ahead
• Initial payment requirements are generally low
• The rentals are tax deductible
• A residual value can be included in the lease thereby reducing the monthly payments and helping cash-flow