A finance lease differs from an operating lease in many ways but it remains a fixed term contract which allows you the benefit of an asset without ultimate ownership.
The key difference is that a finance lease is structured to pay the full amount of the asset value and there is no residual value element reducing the payments. Monthly payments are therefore higher.
To offset this a “Rebate of Rentals” to the client/lessee is made at the end of the agreement following the asset sale. A percentage of the sale of the vehicle or trailer will be rebated as a lump sum back into the business/lessee. This percentage (typically around 95%) of the re-sale value is pre-agreed at the outset of the contract.
“Their advice is invaluable. Thanks to the team’s expertise, we’ve benefitted from carefully negotiated, flexible, and cost-effective funding for our fleet”.
Dai Powell, Chief Executive of HCT Group, Aug 2017
“Through dealing with Asset Alliance Group in the past I have always experienced a great service level and an overall excellent customer experience. This paired with their commercial competitiveness in the marketplace made it an easy choice”
Martin Fryer, Transport Manager, Premier Traffic Management
FINANCE LEASE BENEFITS
A Finance Lease offers a fixed term contract without in-built maintenance. It differs from an Ops Lease in that payments are based on the full asset value (including RV) but then provides a deferred cash rebate on the RV at the at the end of the contract. It is often an alternative to a Hire Purchase arrangement rather than an Operating Lease.
- A Finance Lease enables minimum capital outlay benefitting cash flow.
- There are potential tax benefits as the VAT is paid monthly on the rental and payments can be aligned with revenue streams and be offset against business profits.
- Unlike HP, a lease represents an off-balance sheet financing of assets. It is not included on the company balance sheet and so reduces levels of debt and liability, reducing balance sheet gearing ratios.
- Upon disposal of the asset, good condition of the asset can create a higher rebate of rental payments to the lessee. The lessee / client therefore assumes more risk and reward for return conditions.
WHY CHOOSE ASSET ALLIANCE
In addition to an award winning service and support, we aim to deliver three unique differentiating factors that help lower the costs of your operating lease:
- We can source the asset direct from the manufacturers on large fleet terms
- We understand accurate residual value setting
- We aim to retain and utilise assets over their entire useful life enabling us to reduce risk on residual values which enable further competitive advantage in our pricing.
Our Asset Alliance Fleet Management team has many years’ experience in the responsible management of truck and trailer fleets. All of the features and benefits of our contract hire, lease and HP options and potential refinancing of your existing leases and loans can be discussed in more detail with your Account Manager.
Contact us now on 01902 625330 to find out how our dedicated teams can help meet your individual needs.
We are thrilled to have retained our title as Commercial Motor’s Finance Provider of the Year for our flexible approach to funding.
See our full range of finance and leasing services
At Asset Alliance Group, our primary role is to help you select the best option for your business to optimize your P&L, balance sheet, cash flow and tax management through the range of options that are available to you.
For companies that require a contract hire arrangement, but with a more flexible period arrangement, we also offer FlexiHire. It is as per our Contract Hire arrangements, but is offered on a 12 month rolling contract.
HP is instalment financing for those who ultimately wish to own the asset and assume all associated costs of maintaining the vehicle or trailer. It differs from a lease primarily in ownership, but it also presents other accounting practices which may suit your business.
With almost 5,000 vehicles under management, we are true commercial vehicle specialists in servicing and maintaining trucks and trailers and all forms of commercial vehicles.
There are many circumstances when rental makes sense. It may support you when your vehicles are off the road for any unforeseen reason or simply to increase your logistics capacity at peak periods.
As contract hire specialists, we offer an industry-leading contract hire product with or without maintenance, built on an unrivalled understanding of the commercial vehicle sector. Our contract hire solutions range from the smallest single truck to the fleet requirements of the UK’s largest logistics providers.