Van Lease

Finance lease

What is it?

As with contract hire, finance lease allows you to hire a van for a fixed monthly fee. But the difference with finance lease is that you take on responsibility for the end value of the van. In other words, it’s like you’re buying it: so you take the risks and rewards, depending on the van’s value at the end of the lease.

Using finance lease for your business van means it will appear on you firm’s balance sheet; outstanding rentals are represented as a liability.

If you go to a small fleet leasing specialist they will give you two choice of finance lease:

  • the residual value lease, or
  • the fully amortised lease.

What does this mean to you?

In a residual value lease, the diminishing value of the vehicle is reflected in the monthly rental, with a final balloon payment covering the estimated residual value at the end of the contract.

If the sold price is above the predetermined balloon payment then the leasing company will usually hand back a percentage of the van’s sale funds to you. If the price is below the balloon payment then you will be liable to pay the shortfall to the leasing company. As we said, it’s a case of risk and reward.

A fully amortised finance lease accounts for the full value of the vehicle over the lease period within the monthly payments. Under these circumstances you may be offered a lease on the vehicle for a secondary period at a very low rental amount. This is often called a ‘peppercorn’ rental.

Benefits

  • You’ll pay a fixed monthly cost for your van
  • VAT can be reclaimed on the finance element
  • Rentals are usually Corporation Tax deductible
  • Potential to carry on using the van after its official lease period
  • Vehicles appear as an asset on the company books

Drawbacks

  •  If used values suddenly plummet when your van’s are sold, you’ll lose out
  • The monthly rentals appear as a liability on the balance sheet

Got a spare 30 seconds?

 Help us to provide you with better market insight by completing a very short survey. It is anonymous and only takes 30 seconds. You will get free access to the quarterly results.

Thinking of the switch to electric?

Need help in finding the right electric vehicle for you? Compare driving range, battery capacity, charging time, price, and features to find the perfect EV for you.

logo