Asset Finance

There are many types of leasing but, all fit one of two categories:

Direct Lease - You choose an asset and the leasing company buyes it for you either brand new or used one to rent it to you.

Sell and leaseback - You sell an asset you already own to the leasing company for fair market value or book written down value and then lease it back.

In both cases, you do not own the asset, but the lesser, who rents it to you. As with any other rental agreement, you return the asset at the end of the lease to the lessor. Most leases allow you an option to renew the lease at a minimal cost. Contract Hire will allow you to buy it from the lessor.

Leasing Options

Full lease,
When the lesser will collect the full value of the asset (plus finance charges), over a number of years. At the end of the period, the asset is sold in the market and you get a share of it.

Normally, you will not be able to become the owner of the asset at any time. However, you may have the option to extend your lease at a minimal rental (sometimes referred to as "peppercorn rental"). As the lesser has received almost the full value during the initial lease period.

Operating Lease.
Often with a significantly shorter than the working life of the asset, is more like a regular rental. At the end of such lease the lessor will either sell the asset in the second-hand market or to lease it again. Normally there is an option to extend the leasing period at the end.

Contract Hire / Hire Purchase
Often used for cars and other vehicles that includes a number of additional services such as maintenance, management or replacement if asset is in repair. This is an agreement for the hiring of an asset with an option to purchase. The legal title will pass to you when all payments have been made. The term of a hire purchase must be significantly shorter than the working life of the asset.

In this case you are able to claim capital allowances as if you had purchased the asset outright, gaining immediate use of it.

It is important for you to anticipate your future needs as each option has its advantages and disadvantages and will affect your monthly payments.

Advantages and Disadvantages of Leasing Glossary of Terms

Why not discuss you requirement with one of our advisors will help you to decide if what is the right for you and your business. Call now at: 08451 30 40 92/3 to book an appoinment.

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