This option is worth considering if you are VAT registered, want a competitive monthly rental and don’t mind taking on the risk of a vehicle’s future value. You’ll pay an initial rental to the finance company, followed by monthly payments, and there may be a final balloon rental payable. After this, you can continue to lease the vehicle for a small ‘peppercorn’ rental, or sell the vehicle and retain the majority of the sales proceeds.

Example:finance lease

New Vauxhall Vivaro 2.0 CDTI LWB Sportive Van.

Initial rental £1,316.70 + VAT

followed by 48 monthly rentals of £296.27

Most finance companies will have document fees payable with their agreements – typically around £150 with the first and last payments

Why choose this finance agreement?

Choose Finance Lease if you want to benefit from lower monthly rentals and can reclaim VAT. Be aware that you don’t own the vehicle, and you’ll take the risk on the vehicle’s resale value.

What can I finance on hire purchase?

New cars and vans, all used vans and used cars that are ‘Vat Qualifying’ (this means that the car is being sold subject to VAT – a dealer demonstrator or ex-lease car will be VAT qualifying.)

Who owns the car?

The finance company are the legal owners of the car. Your name will appear on the vehicle registration document (V5) as the registered keeper and you’ll pay for the annual road fund licence.

I want to change cars, but I haven’t finished paying for it yet.

That’s fine, you can request a settlement figure from the finance company at any point and sell the vehicle on their behalf.

I’m at the end of my contract and I don’t want to keep the car.

With a finance lease, it’s down to you to sell the vehicle at the end of the agreement. You’ll retain the majority of the sales proceeds, less any outstanding balloon payment due and a small percentage of the selling price which the finance company will receive.

How much VAT can I reclaim?

You’ll need to be VAT registered to gain any benefit from a finance lease. If you’re leasing a commercial vehicle then you can reclaim all the VAT levied on your monthly rentals. If it’s a car, then you can reclaim just 50% of the VAT (unless the car is only for business use and is not driven home at night).