Finance Lease
Finance lease.
This can be a potentially tax-efficient way to fund vehicles for companies who are willing to take on the risks of vehicle disposal.
How does it work?
You pay a sum each month for an agreed period to use the vehicle. At the end of the contract, you are responsible for selling the vehicle.
Benefits.
Similar VAT and corporation benefits to contract hire
Low initial payment
A choice of fixed or variable interest rates
Rentals can be offset against taxable profits
Reduced capital outlay.
You need to balance these benefits against the cost of monthly rentals, which are usually higher than for contract hire, and the financial risks of reselling the vehicle in a potentially volatile market. You also need to factor in the administrative cost of reselling. Additional services, such as maintenance and relief vehicle, are not included in this scheme.