Finance Lease

Finance Lease is for todays modern business one of the most popular means of finance available, it enables your business to acquire a broad spectrum of assets or equipment.  With this finance plan you have operational control over the asset without ownership, and the option to gain a share of the economic return when the asset is sold at the end of the agreement.

At the start of the agreement you simply choose an advance rental or deposit to be paid.  Choose your contract term, typically 18–60 months. Then throughout the term of the agreement you pay equal monthly instalments with a fixed rate of interest.

With a Finance Lease you also have the flexibility to defer a final lump sum, a balloon payment until the end of the lease agreement to reduce your monthly rental.  

Initially when an asset is purchased, VAT is paid on the advance rental or deposit, and not the purchase cost of the asset.  All monthly repayments are also subject to VAT. 

As a VAT registered business you may reclaim up to 100% of the VAT element on your rental. 

If your business is non VAT registered the cost of VAT is spread with your monthly repayments over the term of the agreement, improving your cash flow.

At the end of the agreement you then have a number of options.

Option 1

Enter a Secondary Rental Agreement and pay an annual Peppercorn Rental, for continued use of the asset over an agreed term.  (Subject to Secondary Rental Terms & Conditions set by the finance provider).

Option 2

Sell the asset to an independent third party and benefit from a majority of the potential sale proceeds. (Sale price must be agreed with the finance provider).

Option 3

Return the asset to the finance company—the finance provider may sell on your behalf and return a lesser percentage of the potential sale proceeds.

Why Choose Finance Lease?

  • Flexible terms available with low initial outlay
  • Fixed monthly rental payments for ease of budgeting
  • Option to reduce your monthly rental by deferring a balloon payment to the end of the agreement 
  • Assists cash flow—VAT is spread on monthly payments, not the purchase price 
  • Tax efficient—Rentals are offset against taxable profits
  • Asset appears on balance sheet
  • Flexibility at the end of the term to return the asset, sell, or extend the lease agreement

For further information or to discuss how Chatsbrook can help you or your business please contact us here.