Finance Lease Explained

Asset finance is recognised as a flexible approach to funding that gives businesses the equipment, vehicles, plant, and technology they need without adversely affecting cash flow. It can be used for both new and used assets or to release value from existing assets.
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What is a finance lease?

The term "financial lease" is used to describe a type of equipment lease in which the buyer (or "lessee") rents out an asset for a specified period, and most of the risk and rewards are transferred to the lessee. Although the legal title remains with the finance provider, the lessee effectively finances the purchase of the leased asset with a monthly payment. At the end of the lease, you can hand the asset back, continue renting or sell the asset to a third party and retain 95% of the sale proceeds at the end of the lease period. 

When it comes to asset finance, we offer a variety of different finance plans. Flexibility is one of the critical parts of success when you work within a business, no matter how large or small you are. A finance lease is best tailored to you if you have a business that requires at least one asset but does not have the funds to pay upfront.
New or used manufacturing equipment
Available on private purchases
Tailored finance packages
Long-term finance solution
Competitive finance solutions
Fixed monthly costs

How could finance leasing your asset help your business?

Suppose your company decides to take out a finance lease to fund the cost of a new asset. In that case, you will be financing the asset for a specified period (two or three years, for example) and making regular monthly payments over the lease term. Your company can take advantage of the equipment , plant or machinery without paying the high initial cost of a new asset. You will be able to handle the administration of the asset, and the assets will appear on your company's balance sheet. The usage for the asset is agreed at the beginning of the lease.

If these restrictions are met, monthly payments and interest rates are fixed for the duration of the contract. If your business is VAT registered, you can reclaim 50-100% of VAT payments depending on the asset you are financing. If your company is not VAT registered, you can amortize the VAT costs across the term of the lease to help reduce the initial outlay. Your payments may be able to be offset against taxable profits (special rules may apply to certain assets).
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Plant and Machinery Finance - Loader Finance

Why choose finance lease over business contract hire?

Many businesses feel contract hire agreements constrain them, especially for companies that use the assets daily. The working asset is a workhorse vehicle used for transporting tools, supplies, business products, and various other things from place to place. It is often given less regular attention. A working asset, such as an excavator, lorry, or machinery, will be more prone to scratches, damage, and misuse, so there is a high chance the hiring company will charge fees if the vehicle is not returned as provided.

Under a contract hire, it is easy to constantly worry about the asset's state, forever imagining increasing fees that may become a reality at the end of the contract. Mileage becomes an issue, and a layer of stress mars the smooth experience of the lease – something which leasing is specifically designed to avoid.

No one is monitoring the vehicle's condition under a finance lease; however, it is still in your best interest to keep it in good condition for future sale. Any modifications or damage was done become the responsibility of the lessee and can be dealt with accordingly.

How do I get the best finance lease deal?

Suppose you are considering business leasing, whether for a van or plant & machinery equipment, AFARL can help. Our expert representatives work with a range of the top leasing companies across the UK and can help you find the best leasing deal.

Different businesses have different needs, and we understand that an essential business contract hire may not provide the features of a finance lease that may be more suitable for some businesses. That's why we work with companies that offer both options.

If you have questions about what happens at the end of a leasehold or would like us to provide a finance lease example for clarity, please reach out to us today. You can call us, send us a message on Facebook or Instagram, or fill out our contact form so one of our advisors can call you at a convenient time.

The benefits of finance lease:

Fixed payments throughout the duration of the agreement.
The upfront costs of a finance lease are low, so you can start using the assets immediately without needing significant capital.
Depending on what suits you best, you can choose between fixed and variable interest options.
The tax advantages of buying a car through a rental agreement are that VAT is payable on the rentals, not the purchase price. At the same time, payments can typically offset the asset against taxable profit. However, there are special rules that apply to cars.
No additional mileage or damage charges at the end of the contract.
The asset will remain the property of the leasing company. However, you will receive 95% of the proceeds if it is sold to a third party at the end of the finance lease contract.
Own the asset at the end of the term by making a further payment, known as a balloon payment, and have complete ownership of the asset.
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Finance Lease - Truck - Haulage

The different types of asset finance we offer

Highly competitive rates from across over 40 lenders, getting you more for your money and the tools to boost business growth

Finance Lease

A finance lease is a method of financing assets where they remain the property of the finance company that hires them and you pay for the hire of the asset(s).

Lease Purchase

Regular payments are structured like a lease/rental agreement, but you agree to take ownership of the asset after all payments have been made.

Hire Purchase

You hire the goods and then pay an agreed amount by instalments. You don't own the goods until you have paid the agreed amount in full.
Asset Finance - Fleet Finance

Finance lease vs. hire purchase?

Choosing between a hire purchase and a finance lease is a critical financial decision for many businesses. 

With hire purchase, the total value of the asset plus VAT is usually paid upfront, whereas, with a finance lease, VAT can be spread across the monthly rental. Many companies opt for hire purchase because it allows them to spread the cost of the asset over time and appear on the balance sheet. 

Finance leases are often used by companies to show an asset as an operational cost, and to offset rental payments against profits.. It is important to note that finance leases are usually for a longer term than operating leases, as they are for most of the asset's useful life.

Finance solutions for all requirements

Fleet Vehicles
Sports Cars
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Vintage Cars
In a finance lease, the individual or organisation leasing the asset, known as the lessee, assumes most of the responsibilities and advantages associated with owning the asset, such as upkeep and insurance. The lessor, who owns the asset, generally holds onto the title of the asset and provides financing for the lease.
Finance leases can provide several benefits, such as the ability to acquire assets without a large upfront investment; the ability to preserve capital and maintain a strong balance sheet; and the flexibility to upgrade or replace the asset at the end of the lease term.
 You or the business is responsible for the maintenance and insurance of the asset, which can be costly. You may required to make a large balloon payment at the end of the term. Some agreements may not have the option to purchase the asset at the end of the lease term.
Lease payments in a finance lease are usually calculated by considering the cost of the asset, the length of the lease term, and the interest rate charged on the financing. The lessee will make regular payments to the lessor over the course of the lease term, with the final payment being a balloon payment that pays off the remaining balance of the financing.
Why choose us?
Regardless of your situation, we aim to provide a finance solution that is specific to you

We understand that each applicants’ requirements and circumstances are different and may not necessarily fit in to set parameters
Finance and refinance solutions for most assets considered
Exceptional customer service and support that's with you every step of the way
Licensed credit broker that is authorised and regulated by the Financial Conduct Authority (FCA)
Variable rate and seasonal payment options offered

Get in touch today to speak to one of our finance lease experts

© Copyright 2021 Asset Finance & Refinance Limited. All rights reserved. Authorised and licensed by the FCA.
Disclaimer: Asset Finance and Refinance limited act as a licensed credit broker and not a lender, authorised and regulated by the Financial Conduct Authority, registration number 773835. All finance is subject to status and income. Applicants must be 18 or over, terms and conditions apply, guarantees and indemnities may be required. Written quotations on request. Certain exclusions for NI residents. Asset Finance and Refinance Limited can introduce you to a limited number of finance providers based on your credit rating and we may receive a commission for such introductions.
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