Leasing
The most fundamental aspect of a lease is that ownership will never pass to the business customer. Leasing is a highly flexible way of acquiring the assets your business needs. It allows you to preserve working capital by financing equipment over the course of its cash-generating life.
The leasing companies will claim the capital allowances and pass the benefit on to the business customer, by way of reduced rental charges. The business customer can generally deduct the full cost of lease rentals from taxable income, as a trading expense. Leasing can bring lower deposits and lower monthly payments than loans or hire purchase. It also gives you a new line of credit, totally separate from everyday business banking and overdraft facilities.
There are different types of leasing arrangements. Decide which is best for you:
The leasing companies will claim the capital allowances and pass the benefit on to the business customer, by way of reduced rental charges. The business customer can generally deduct the full cost of lease rentals from taxable income, as a trading expense. Leasing can bring lower deposits and lower monthly payments than loans or hire purchase. It also gives you a new line of credit, totally separate from everyday business banking and overdraft facilities.
There are different types of leasing arrangements. Decide which is best for you:
· The finance lease or full payout lease
This is closest to the hire purchase alternative. The leasing company recovers the full cost of the equipment, plus charges, over the period of the lease. Although you do not own the equipment, you have most of the 'risks and rewards' associated with ownership. You are responsible for maintaining and insuring the asset and must show the leased asset on your balance sheet as a capital item.
· Operating leasing
If you need a piece of equipment for a shorter time, then operating leasing may be the answer. The leasing company will lease the equipment, expecting to sell it secondhand at the end of the lease, or to lease it again to someone else. It will, therefore, not need to recover the full cost of the equipment through the lease rentals. The lease period in this case will usually be for two to three years, although it may be much longer, but is always less than the working life of the machine.
· Contract hire
Contract hire is a form of operating lease and it is often used for vehicles. The leasing company undertakes some responsibility for the management and maintenance of the vehicles. Services to you can include regular maintenance and repair costs, replacement of tyres and batteries, providing replacement vehicles, roadside assistance and recovery services and payment of the vehicle licenses.
Source Commercial Finance can help and advise you on leasing and other financial matters. Contact us at Source Commercial Finance.