Dawsongroup | finance

Explained: Finance lease

For the uninitiated, the world of asset financing and leasing can seem at best unfamiliar, and at worst downright confusing.

Tailoring asset financing solutions to suit your business is what we do best – and you can rest assured that if you come to us we will guide you through the whole process, identifying and illuminating your choices at every step of the way.

But if you’re still toe-dipping at the edge of the asset financing pond, uncertain as to whether to take the plunge, read on! Welcome to the first of a mini-series of blogs that seek to explain the four main finance and leasing options. Together they will provide a handy cheat sheet to help you consider your next steps.

What is a finance lease?

A finance lease is a long-term lease which can be used to finance an asset through monthly repayments – anything from IT equipment to a truck – for an agreed period. Terms of between one and seven years are available, with all the risks and rewards of ownership transfered to you, the lessee, while ownership still remains with us the leasing company.

What are the features and benefits?

A finance lease allows your business to have exclusive use of the desired asset as if you owned it, but with a minimal initial capital outlay. With potentially no upfront cost requirement, it allows businesses to protect their working capital. Deposits start from £0, and VAT is paid on payments rather than upfront – another essential cash-saving element of a finance lease. Other advantages include that VAT on rentals is reclaimable, and rentals can be offset against taxable profits.

As the lessee, you will be responsible for the maintenance and repairs of the asset. When the initial term ends the asset is sold to a 3rd party and the customer retains 99% of sales proceeds after all payments made, including, if applicable, the balloon payment – a lump sum owed to the lender at the end of a finance agreement.

Alternatively, you might opt for a secondary rental period at a cheaper monthly rate than the first lease.

Will it work for me?

A finance lease is a solid useful option for many businesses from SMEs to big corporations. One of the biggest benefits is that the finance lease offers known monthly rentals, improving businesses’ cash flow.

It is most commonly used to finance commercial vehicles like vans and cars, which will work hard and be retained for many years, but can be tailored to a specific operating environment.

It’s also important to bear in mind that a Finance Lease will appear on your business’s balance sheet for accountancy purposes, which may not be the case for all finance options open to you.

If you’re still unsure about whether a finance lease is the right fit then get in touch. At Dawsongroup Finance we take time to get to know and understand your business. We’ll talk you through your options, answer every question, and provide the tailored advice and support you need to navigate the world of asset financing like a pro!

Reach us at info@dgfinance.co.uk or by calling 01425 474070.