Finance Leasing
Finance Option - Leasing
Leasing Leasing is a straightforward rental agreement with significant tax advantages, especially if your VAT registered. Finance companies are able to recover the VAT element on the cost of a new car, therefore passing the savings on to you in the form of lower monthly rentals. A proportion of your rentals are also allowable against tax.
There are two types of Leasing Full Payout Leasing: You simply choose a leasing period, normally 36 months. Your initial deposit is low normally 3 rentals in advance followed by 35 rentals. As the interest rate applied to the lease is fixed at the outset, so are your monthly rentals, which should assist your budgeting.
Balloon Payout:
With this type of leasing, the car's estimated resale value is taken into account when the rental payments are calculated, this estimated value is offset to the end of the agreement thus reducing your monthly rentals. When your leasing agreement ends you must sell the vehicle to an unconnected third party. If you have chosen a balloon lease, any excess proceeds over and above the estimated resale value of the car will be returned to you as a refund on the rentals you have paid. If you have chosen a full payout leasing a refund of rentals is made, less a small administrative fee.
Benefits of Leasing:
Full use of vehicle without ownership. (The car is still classed as an asset and shown on the balance sheet, so improving the book or accounting value of the business)
A percentage of the VAT added to rentals can be reclaimed. (Reclaim 50%, which lowers the gross rentals cost)
Other 50% of VAT charge can be offset against your tax bill as per the %age of monthly rental
VAT on cost of the car is recovered by finance company. (Benefits of a lower capital cost to the finance company is passed on to the customer in the form of lower monthly rentals i.e. the rentals are calculated on the net of VAT price.
