Finance Explanations

Finance Lease, what is it and how does it work?

Finance Lease is ideal for customers who want the benefit of running a van with a low initial outlay followed by a low monthly rental.

You simply have to agree an initial rental amount. This can be as little as your first months rental.

Then you agree a monthly rental and contract period, which can include an acceptable final rental, often called a "Balloon" or "Terminal Rental". This will have the effect of keeping your monthly rentals to a minimum.

There is also an option called a full payout Finance Lease, this is simply a Lease with NO "Balloon" or "Terminal Rental" payment at the contract end. .

Once you agree your preferred term and rental plan this remains fixed for the contract term. You will never pay any more, or less than the pre VAT monthly cost agreed within the contract.

Payments are made monthly by Direct Debit throughout the contract term. .

What are the options at the contract end?

  • Part exchange the van back to Low Cost Vans, This is the most common option and the principal behind a lease agreement. We use the value of your van and offset this against the "Balloon" or "Terminal Rental" using the vans equity to pay off the "Balloon" or "Terminal Rental". This option will free you up to arrange a new Finance Lease Contract.
  • Pay off the "Balloon" or "Terminal Rental" and continue to use the van entering into a secondary term.
  • In some instances, arrange a further schedule to pay off the "Balloon" or "Terminal Rental".

  • What are the benefits?

    The monthly rentals paid can be offset 100% against your pre-tax profits making it one of the most tax efficient ways of acquiring your new van.

    Our Business approach is to ensure our advice is clear fair and not misleading

    We aim to give you honest, unbiased advice. Below we have listed for you the advantages and disadvantages of Finance Lease.


  • Minimum capital expenditure
  • Accurate monthly budgeting
  • Improved cash flow
  • Fixed monthly rentals
  • No damage recharge as you are responsible for the disposal of the vehicle
  • Reduced administration
  • Commercial vehicle are up to 100% tax deductable
  • Availability of refinancing the balloon payment (Exclusions apply to this option)
  • No need to be VAT Registered
  • Potential to keep the vehicle longer after lease expires (Secondary rental applies)
  • Early termination is a possibility
  • Finance terms from 24 to 60 months

  • You will never own the vehicle as the vehicle must be sold to a third party as the end of the agreement (See what are the options at the contract end above)
  • The responsibility of the vehicle disposal is yours, this means associated depreciation risks are also yours.
  • Interest rates can vary on some contracts
  • You must have fully comprehensive insurance
  • Where a milage is used to calculate a Final Rental, exceeding this mileage could result in financial shortfall at the end of the contract.p>

  • Contract Hire, what is it and how does it work?

    In today’s economy everyone is looking to save money.

    If you’re a business user you will need to include transportation costs in your business plan and cash flow forecast, even if you’re not in business we all need to budget, right?

    What should you consider?

  • How much deposit do I need?
  • How much will it cost to run and maintain the vehicle?
  • How much will it be worth when I’ve finished with it?
  • How much is road tax these days?
  • I may need to borrow money next year...will the fact that I’m paying for a new van affect what I can borrow?

  • If you are thinking about any of these you need to be considering Contract Hire.

    Contract Hire (Also known as Operating Lease) is the ONLY way to guarantee the running cost, and the true cost, of running a vehicle (or fleet of vehicles)

    LOW deposit options available (Compared to other funding methods) from as little as your first month’s rental in advance. The monthly cost is fixed.....You will never pay anymore, or less, than the pre VAT monthly cost of the contract.

    If you choose the option of maintenance services (at an additional monthly cost) the van is even serviced for you.

    Worried about what it’s worth in the future? One of the major benefits is that there are no disposal worries as the future value is underwritten by the leasing company.

    There is no need to tax the vehicle – the road tax is provided for you, for the whole term of the contract. Changes in the cost of Road Tax will increase your monthly rentals.

    Best of all because it’s a “rented vehicle” it normally remains off Balance Sheet (which means it’s not treated as an asset), and because it’s classed as a rental it won’t show as borrowings against you or your business on your credit file, leaving other funding lines open.

    For business users, where the vehicle is classified as a van (by HMRC) it’s classed as a pure business expense and it’s therefore Tax Deductable (Vans are up to 100% Tax Deductable). The VAT element on your monthly repayment is also 100% recoverable providing you are VAT registered and not on the flat rate scheme. (This also applies to the VAT on the maintenance).

    Our Business approach is to ensure our advice is clear fair and not misleading

    We aim to give you honest, unbiased advice. Below we have listed for you the advantages and disadvantages of Contract Hire.


  • Minimum capital expenditure
  • Accurate monthly budgeting
  • Improved cash flow
  • Fixed interest rates
  • Rentals or a proportion of the rentals can be offset against the businesses profits
  • No vehicle disposal problems
  • Reduced administration
  • On-going advice and support
  • Road Fund Licence provided (vehicle excise duty paid) for duration of contract
  • Optional maintenance package
  • Optional breakdown rescue cover
  • Optional replacement vehicle cover in event of breakdown
  • Some maintenance packages also include tyre replacement

  • Fixed Time and mileage contract
  • Early termination can be expensive
  • If you do more miles than agreed you will be charged excess mileage for every additional mile done above what was set out within your contract
  • You must look after the vehicle and return it in a well maintained condition otherwise you will be charged for any damage over and above that stated in the ‘Fair Wear and Tear Guide’ where applicable
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