A finance lease is usually accessed by VAT-registered businesses and companies. It is offered to businesses where a moveable asset is purchased from a supplier – the business can then use this asset while paying an effective rental + VAT rather than a repayment.
The fundamental characteristic of a lease is that ownership never passes to the client. The client can generally deduct the full cost of lease rentals from taxable income, as a trading expense. As with hire purchase, the client is responsible for maintenance of the equipment.
The finance lease which Liberty can offer is closest to the hire purchase alternative. Liberty recovers the full cost of the equipment, plus charges, over the period of the lease. Although the client does not own the equipment, they have most of the ‘risks and rewards’ associated with ownership. They are responsible for maintaining and insuring the asset and must show the leased asset on their balance sheet as a capital item.
When the primary lease period ends, either a Secondary lease period commences or, if the client wishes to stop using the equipment, it may be sold to a third party. The client arranges the sale on behalf of Liberty Leasing and we return the sale proceeds to the client less the VAT on the invoice and a retention fee.
Some of the benefits of a finance lease include:
VAT on monthly rentals can be reclaimed if you are a VAT registered business (varies for personal use vehicles).
Taking out a finance lease allows you to feature the vehicle on your balance sheet.
At the end of the primary term of the lease Liberty Leasing can either invoice to a third party or the lease can enter secondary rentals (where only one rental is payable annually)
The rentals are fixed during the primary rental period allowing you to forecast cash flow and compare the expected revenue and profits generated by the use of the asset.
For more information regarding leasing or any of our products, please speak to your Account Manager or contact the sales team.