Finance Lease
Finance lease is a method of funding equipment over a set term. However, ownership of the equipment remains with the finance company who can sometimes claim the capital allowances on the asset. This benefit can be passed onto the customer in the form of a competitive repayment.
Repayments are based on the full capital cost plus interest, at the end of the term our customer can either sell the equipment and receive a substantial percentage of the sales proceeds or retain use of the equipment by paying a nominal annual payment referred to as "secondary rental" or "peppercorn rental".
Features
- Use of the latest equipment without ownership.
- Equipment is still shown on balance sheet with the payments as a liability.
- The finance company claims writing down allowances and pays the full VAT on the equipment.
- Repayments are subject to VAT which can be reclaimed.
- Equipment can either be sold at the end of the finance term or a nominal annual payment is made to retain use of the equipment.
Benefits
- Finance company pays the VAT on equipment cost which can benefit the customer's cashflow.
- Negotiable initial outlay enabling the customer to preserve working capital.
- Customers receive a substantial percentage of the sale proceeds.
- Payments can be structured around the customer's cashflow or seasonality of their business.
- Finance lease is not payable on demand provided payments are made in accordance with the terms of agreement.