Finance Options

Click on the options below to find out more about each option.

What is a Finance Lease?

Leasing is a long term rental agreement providing the exclusive use of a van for an agreed period of time at a fixed monthly rental. As the rentals will usually exceed the cost of the van, the customer will usually receive the majority of the proceeds of sale at the end of the lease. Leasing offers an alternative funding solution to buying a van using Hire Purchase or a bank loan.

How Leasing Works

The customer chooses the vehicle and specification in the normal way. The Lease agreement will require an initial rental, typically equivalent to 10% of the cost of the vehicle. The customer then makes monthly rentals for the agreed lease period which is usually 2 – 5 years. At the end of the initial lease period, the customer has a choice;

  1. Secondary Rentals – Extend the lease for a further year at a nominal rental (usually one monthly rental for the whole year) or
  2. Rebate of Rentals – Part Exchange or Sell the vehicle to a third party at its fair market value and the Lease Company will usually pass 95% of the sale proceeds to the Customer as a Rebate of Rentals.

If the customer chooses to extend the lease under the Secondary Rentals Option, they may terminate the lease at any time in the secondary period and part Exchange or sell the vehicle to receive a Rebate of Rentals.

What is a “Balloon Rental”?

Some leases may contain a balloon rental. This is a lump sum, payable at the end of the lease and is used to lower the monthly rentals. It is NOT a Guaranteed Value and the customer has to pay this sum, irrespective of the value of the van. The advantage of a balloon rental is that it lowers the monthly rentals, the disadvantage, is that it erodes the customer’s equity in the vehicle.

VAT

All rentals and payments under a lease attract VAT at the prevailing rate (Currently 20%). If the customer is VAT registered, the VAT on each Van rental can be reclaimed. When the vehicle is sold at the end of the lease, the sale price and the Rebate of Rentals will both be subject to VAT.

Leasing Vs Purchase

Finance Lease Lease Purchase
Deposit Rental + VAT on the rental The VAT element of the purchase price + Deposit
Monthly payments Rental + VAT Repayment
End of Term Extend the Lease or Sell Exercise Purchase Option
Tax treatment Treat whole rental as an expense in the year they are paid Claim Cost of van and interest against taxable profits
Tax advantages May be better if business has low taxable profits May be better if you can claim whole of cost against tax in year of purchase
VAT Claim the VAT element of the rental as each rental is paid Claim the VAT element of the Van cost at the time of purchase.
Security The lease company has the van as it’s prime security The lender company has the van as it’s prime security

Overall, Leasing will often offer a cashflow advantage in the early period as the customer’s initial rental is lower. The current tax treatment means that the lease rentals are treated like other business expenses and this spread over the lease period.

More information and support

We will be delighted to answer your questions and help you make the right choice. We work with a long established business finance partner, Corporate Finance Leasing Ltd and will be happy to direct you to them for additional information on any aspect of finance.

Legal Disclosure

Fleet Sales / Harpenden Vans are a Partnership, the partners are: William Hutchins, Gillian Hutchins, Andrew Kiff. Fleets Sales / Harpenden Vans is a Licensed Credit Broker authorised and regulated by the Financial Conduct Authority authorisation number 682423. Offering a wide range of Credit and Hire Facilities to suit our customer’s circumstances and requirements.

What are Lease Purchase, Hire Purchase and Conditional Sale?

Lease Purchase (also known as Hire Purchase) and Conditional Sale are essentially the same facility and from this point we will refer to them as ‘Lease Purchase’. Lease Purchase is a facility for the Purchase of a van at a fixed monthly repayment, over an agreed period of time. Lease Purchase represents a competitive alternative funding solution for buying a van using a bank loan.

How Lease Purchase Works

The customer chooses the vehicle and specification in the normal way. The Lease Purchase agreement will require an initial deposit, typically equivalent to at least the VAT element (20%) of the cost of the vehicle. The customer then makes fixed monthly payments on the balance for the agreed repayment period, which is usually 2 – 5 years. At the end of the agreement, the customer will usually pay the Purchase Option Fee and legal title passes to the Customer

What is a “Balloon Rental”?

Some Lease Purchase agreement may contain a balloon payment. This is a lump sum, payable at the end of the agreement and is used to lower the monthly payments. It is NOT a Guaranteed Value and the customer has to pay this sum, irrespective of the value of the van. The advantage of a balloon payment is that it lowers the monthly payments, the disadvantage, is that it erodes the customer’s equity in the vehicle.

VAT

VAT is charged on the cost of the Van and this may be reclaimed if the customer is VAT registered. Payments under a Lease Purchase agreement do NOT attract VAT and are currently exempt.

Lease Purchase Vs Leasing

Lease Purchase Finance Lease
Deposit Usually the VAT element of the purchase price + x% Rental + VAT on the rental
Monthly payments Repayment Rental + VAT
End of Term Exercise Purchase Option Extend the Lease or Sell
Tax treatment Claim Cost of van and interest against taxable profits Treat whole rental as an expense in the year they are paid
Tax advantages May be better if you can claim whole of cost against tax in year of purchase May be better if business has low taxable profits
VAT Claim the VAT element of the Van cost at the time of purchase Claim the VAT element of the rental as each rental is paid
Security The lender has the van as it’s prime security The lease company has the van as it’s prime security

Overall, Lease Purchase will often offer a tax advantage and ultimately gives you ownership of the vehicle.

More information and support

We will be delighted to answer your questions and help you make the right choice. We work with a long established business finance partner, Corporate Finance Leasing Ltd and will be happy to direct you to them for additional information on any aspect of finance.

Legal Disclosure

Fleet Sales / Harpenden Vans are a Partnership, the partners are: William Hutchins, Gillian Hutchins, Andrew Kiff. Fleets Sales / Harpenden Vans is a Licensed Credit Broker authorised and regulated by the Financial Conduct Authority authorisation number 682423. Offering a wide range of Credit and Hire Facilities to suit our customers circumstances and requirements.

What is Contract Hire?

Contract hire is a long term rental agreement providing the exclusive use of a van for an agreed period of time and mileage, at a fixed monthly rental. At the end of that time, the van will be handed back and subject to any adjustment rental, the customer has no further rights or interest. Contract Hire is an alternative method of using a van.

How Contract Hire Works

The customer chooses the vehicle and specification in the normal way. The customer also specifies the mileage that the vehicle will be used for. The Hire agreement will require an initial rental, typically equivalent to 3 monthly rentals. The customer then pays monthly rentals for the agreed hire period which is usually 2 – 4 years. These rentals will usually include Road Fund and may, as an option, include vehicle Maintenance, tyres etc. The Hire Company retains the ownership of the van and also accepts the risk of the van’s re-sale value, subject to the customer maintaining the van in good condition. At the end of the contract period, the vehicle is simply returned to the hire company. There may be an additional rental to pay if the agreed mileage has been exceeded or if the van is not in the contractual Return condition.

Lease Purchase Vs Contract Hire

Lease Purchase Contract Hire
Deposit Usually the VAT element of the purchase price + x% Rental + VAT on the rental
Monthly payments Repayment Rental + VAT
End of Term Exercise Purchase Option Return the Van
Tax treatment Claim Cost of van and interest against taxable profits Treat whole rental as an expense in the year they are paid
Tax advantages May be better if you can claim whole of cost against tax in year of purchase May be better if business has low taxable profits
VAT Claim the VAT element of the Van cost at the time of purchase Claim the VAT element of the rental as each rental is paid
Security The lender has the van as it’s prime security The Hire company has the van as it’s prime security

Overall, Contract Hire allows the user to avoid the unknown re-sale risk of owning their van and can also fix monthly maintenance costs as an option. It allows the user to concentrate on their business.

More information and support

We will be delighted to answer your questions and help you make the right choice. We work with a long established business finance partner, Corporate Finance Leasing Ltd and will be happy to direct you to them for additional information on any aspect of finance.

Legal Disclosure

Fleet Sales / Harpenden Vans are a Partnership, the partners are: William Hutchins, Gillian Hutchins, Andrew Kiff. Fleets Sales / Harpenden Vans is a Licensed Credit Broker authorised and regulated by the Financial Conduct Authority authorisation number 682423. Offering a wide range of Credit and Hire Facilities to suit our customers circumstances and requirements.