Hire Purchase » Commercial Van leasing UK

Commercial Van leasing UK

Full Payout Finance Lease

This is a very tax efficient method of financing your vehicle. A relatively small initial rental, or deposit, normally 3 monthly rentals or repayments in advance, followed by the remainder of the rentals or repayments over the term, with a choice of up to 5 year terms available.

If you are not VAT registered, it means that you pay the VAT monthly and similarly, VAT registered companies pay the VAT monthly, and claim it back quarterly. 100% of the monthly repayments are offset against taxable profits for the full term of the agreement.

At the end of the term, you are legally obliged to sell the vehicle, as the taxman will not allow you the tax advantages of the lease as well as ownership of the vehicle at the end of the agreement. So, you choose who you sell the vehicle to, you negotiate the price, and then you pay the finance company 5% of the sale proceeds, and you keep 95%. Normally you would use the 95% of the sale proceeds that you have retained as the deposit on your next new van, but you are not obliged to do so and you can do whatever you want with it as it is your money.

If you choose to part exchange your old van for a new van, which you can do at any time in the agreement, the supplier of the new van will request the settlement figure from your current finance company, and should the settlement figure be less than the market value of the part exchange, the difference can then be used as part or all of the deposit on the new van, whilst if the settlement is more than the market value of the part exchange, the difference can be added to the new finance agreement, but the deposit will then need to be paid in full. The new finance figures are calculated dependant upon the settlement figure, and the new supplier would then pay the finance company the 5% of the sale proceeds of the part exchange vehicle to close the previous agreement.

Should you decide you want to keep your old vehicle after the term of the agreement has finished, without selling it, you can request what is called a Secondary Rental figure from your finance company, which you then pay annually instead of monthly, and it allows you to keep the vehicle for up to a further 2 years. This figure would normally be in line with whatever the monthly figure was during your finance agreement, but would only be paid once a year instead of once a month.

Summary

• Deposits are usually 3 monthly repayments (or rentals), but can be any amount if the customer wishes to increase the amount.
• Flexible repayment terms up to 60 months
• VAT is paid monthly but reclaimed quarterly for VAT registered customers.
• Repayments (or rentals) are 100% allowable against taxable profits.
• Leasing can have a balloon or terminal rental as it is sometimes called, deferred to the end of the agreement. The benefit of this is that it reduces the monthly repayment and aids cash flow.
• The vehicle is sold or part exchanged at the end of the agreement, and the customer benefits from 95% of the sale proceeds.
• No mileage penalties or clauses.
• Leasing can still be cost effective for non VAT registered business users, because of the low initial deposits, maximum flexibility, and spreading the VAT element across the full term.
• Secondary rental allows the vehicle to be kept for up to 2 years after the original agreement completion date has been passed.

Article Archive