WHAT ARE THE OPTIONS

Asset finance options

Asset finance spreads the purchase cost over a fixed period, then at the end of the period the asset is either purchased outright, the term is extended or the asset returned to the finance company. Typically the choice is between hire purchase and leasing.

Hire purchase

This is a simple repayment facility where you own the asset at the end of the agreement. Complete control is ensured with fixed interest periods and reassurance that the asset becomes the company's property at the end of the term. Hire purchase can be tax advantageous with VAT usually reclaimable and interest offset against profit

Leasing

Leasing allows full use the asset for the period of the lease. When the contract ends, the company can choose to retain use of the asset via a secondary rental period or have it returned.

Finance lease

A finance lease helps acquire the use of an asset but not commit to ownership. It's a flexible way for a company to get the assets it needs. The finance company buy and own the asset and you enter into an agreement to hire it. This method can also tax advantageous.

Operating lease

With an operating lease the finance company owns the asset and takes the risk of it depreciating. This lease is common for specialised equipment of high value. The asset finance company will build in a residual value which reduces the monthly payments. As with a finance lease, at the end of the agreed term an extension can be provided or the asset returned.

Sale & leaseback

In special circumstances equity from an asset the company owns can be released in a process known as sale and leaseback. The asset is then leased back to the company for an agreed period. Sale and leaseback can provide a welcome alternative to extending overdrafts or taking out further bank loans.

Asset finance summary

• The company can choose to own or return the asset at the end of the agreement
• Easier budgeting with regular, consistent payments
• Fixed rate with variable rate option
• Tax advantageous as VAT is often reclaimable
• Ability to release capital tied up in existing equipment

Typical assets that can be financed:

• Cars 

• Commercial vehicles
• Recovery vehicles

• HGVs
• Buses and coaches
• Plant and machinery
• Agricultural equipment
• Construction equipment