Finance Lease is similar to a hire purchase scheme but with no option to purchase. The length of the agreements is usually calculated over the “useful life” of the vehicle and monthly payments are made. Finance Leases can be either fully amortised (depreciating the entire capital )or with a balloon (recognising the residual value of the vehicle in its calculations). The lessee is charged with any shortfall or credited with any excess on disposal of the vehicle.
In addition to the Finance Lease Agreement most companies will employ a Fleet Management specialist who can purchase, maintain and dispose of the vehicle
What are the Benefits:
> Customer avoids the sourcing of funding
> Flexibility – User can decide when to terminate the contract
> No excess mileage charges
> Opportunity to benefit from gain on sale - A leasing agreement where the risks and rewards of ownership remain with the customer
> Customer can claim Capital Allowances (CA) - Lower of £3000 and 25% of capital cost on a reducing balance basis.
> Interest cost allowable as tax deduction
> Highly competitive variable or fixed interest rates result from GE Capital’s triple A credit rating
Summary
A low cost acquisition method - Cheapest form of acquisition for fleets over 100 vehicles. The tax relief for depreciation could be more favourable than claiming
capital allowance.
Fleet Solutions
Driver Area
