CONTRACT hire is a very popular way for businesses to acquire cars and commercial vehicles, but how many companies actually choose finance lease as an alternative?
Not as many as you may think, unless, of course, they are dealing with a broker that understands and offers the product as part of their portfolio (it is not an option that all brokers necessarily understand and therefore it can be deemed as “harder” to sell).
Finance lease is not an option that all brokers understand and as such, it may not always be offered the client as a form of funding
In addition, the word “balloon” can scare customers off, mainly due to the shortfall balloon disaster that is associated with the recession era.
Jonathan Lewis, Business Development Manager for Global Vans, told us about how finance lease plays a major role within their company as a client LCV funding method;
“Finance lease is ideal for VAT registered companies who would like an on-balance sheet form of finance and also prefer to tackle the administration of their commercial vehicles themselves.
“Our employees are fully trained to guide businesses when it comes to the right funding option for their company and finance lease is a popular and often more flexible way of getting vans on the road than fixed term contract hire.”
10 benefits of commercial vehicle finance lease with a balloon
- The VAT on the monthly rentals is fully reclaimable
- Your business capital is not tied up in a depreciating asset
- VAT is spread across all of the payments, whereas with purchase agreements all VAT is paid up front at the commencement of the term
- All VAT payments are claimed back if registered – if not registered, offset it against tax
- Rentals are 100% tax deductible: reduce your costs and get back up to 40% of all payments – including your deposit!
- Benefit from low deposits and monthly payments (see 7.)
- To reduce payments, offset some vehicle capital to pay at the end of lease
- The payment s are fixed for the entire agreement
- You can settle finance lease early like standard loan
- There are no penalty charges for additional mileage or damage at the end of the agreement
If anything, balloon payments are set to err on the side of caution and calculated given the forecast annual mileage
Jonathan Lewis continued;
“Finance lease with a balloon is VAT beneficial option, with lower monthly rentals during the lease period and a final payment at the end of the agreement which is pre-determined, based on the forecasted resale value of the vehicle.
“If the balloon is set with care, there is no reason why finance lease can’t be a perfect solution for many companies who want to get the best of both worlds when it comes to funding their commercial vehicles.”