Finance Lease Explained

Fixed monthly payments with greater end-of-agreement flexibility.

If your annual mileage is difficult to predict, your vehicles work hard for a living, or you want more flexibility at the end of the agreement, Finance Lease could be right for your business.

Popular with operators of vans, pick-ups and commercial vehicles, Finance Lease allows you to spread the cost of a vehicle through fixed monthly payments while retaining greater involvement in what happens when the agreement ends.

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What is Finance Lease?

Finance Lease is a business vehicle funding solution that allows you to use a vehicle for an agreed period in return for fixed monthly payments.

Unlike Contract Hire, where the vehicle is simply returned at the end of the agreement, Finance Lease gives your business greater involvement in the vehicle’s future value and disposal.

This makes it particularly attractive for businesses operating vans, pick-ups and commercial vehicles where mileage, wear and tear and future resale values can be harder to predict.

Why Choose Finance Lease?

Fixed monthly payments

Predictable monthly rentals help budgeting and cash flow.

Greater end-of-agreement flexibility

More involvement in the vehicle’s future value and disposal.

Popular for commercial vehicles

Ideal for many vans, pick-ups and specialist commercial vehicles.

No fair wear and tear inspections

Unlike Contract Hire, there are no fair wear and tear inspections or damage recharges at the end of the agreement. Instead, the vehicle’s condition and mileage are reflected in the resale value achieved when it is sold.

Potential VAT advantages

Finance Lease can offer VAT benefits for some VAT-registered businesses. Professional tax advice should always be sought.

Potential to benefit from strong resale values

If the vehicle achieves a higher resale value than anticipated, your business may benefit from a proportion of the surplus value realised.

Who is Finance Lease Suitable For?

Finance Lease is often suitable for businesses that:

• Cover unpredictable or high annual mileage
• Operate vans, pick-ups or commercial vehicles
• Want greater flexibility at the end of the agreement
• Want greater flexibility around vehicle condition and mileage
• Want greater involvement in the vehicle’s future value and disposal
• Expect to keep vehicles in service for longer

How Finance Lease Works

Step 1

Choose your vehicle, agreement term and anticipated future value.

Step 2

Fixed monthly payments are calculated based on the difference between the vehicle’s price and its anticipated future value. Because part of the vehicle’s cost is deferred until the end of the agreement, monthly payments can often be lower than funding the full value of the vehicle over the same period.

Step 3

Use the vehicle as normal for your business throughout the agreement.

Step 4

At the end of the agreement, a final balloon payment becomes due. This amount is based on the anticipated future value agreed at the start of the contract.

Step 5

The vehicle is sold to a third party. Depending on the value achieved and the terms of your agreement, your business may benefit from a surplus value or be responsible for any shortfall.

Finance Lease vs Contract Hire

Contract Hire is often the preferred choice for businesses looking for maximum simplicity, fixed costs and no exposure to future vehicle values.

Finance Lease can be a better fit where annual mileage is difficult to predict, vehicles are likely to experience greater wear and tear, or the business wants greater involvement in the vehicle’s future value and disposal.

Not sure which is right for you?

Our experts can explain the differences and help you choose the most suitable option for your business.

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Things to Consider

You are responsible for the vehicle

Your business is responsible for maintaining, servicing and insuring the vehicle throughout the agreement. Optional maintenance packages are available to help spread the cost of servicing, maintenance and repairs through fixed monthly payments.

Resale value affects the final outcome

At the start of the agreement, an anticipated future value (sometimes referred to as a balloon payment) is agreed. When the vehicle is sold, factors such as mileage, condition and market demand can influence the value achieved.

The vehicle is sold at the end of the agreement

At the end of the primary rental period, the vehicle is disposed of to a third party. Depending on the value achieved and the terms of your agreement, your business may benefit from a surplus value or be responsible for any shortfall.

Early termination charges may apply

Finance Lease is designed to run for the agreed term. Ending the agreement early may result in additional charges.

Tax treatment varies

Tax and VAT treatment will depend on your business structure and circumstances. Before entering into any finance agreement, we recommend seeking advice from a qualified accountant or tax adviser.

Frequently Asked Questions

Can I keep the vehicle at the end of a Finance Lease?

Yes. Unlike Contract Hire, Finance Lease offers greater flexibility at the end of the agreement. Once the balloon payment has been settled, businesses can typically continue using the vehicle or arrange for it to be sold. The specific end-of-contract options will depend on the agreement structure and funder.

What is a balloon payment?

A balloon payment is a lump sum due at the end of a Finance Lease agreement. It is based on the vehicle’s anticipated future value, which is agreed at the start of the contract. Because part of the vehicle’s cost is deferred until the end of the agreement, monthly payments are often lower than if you were funding the full value of the vehicle over the same period.

How long can a Finance Lease agreement be?

Finance Lease agreements typically run between 2 and 5 years, although longer terms may be available depending on the vehicle, funder and your business requirements.

The right term will depend on how long you expect to keep the vehicle in service, your preferred monthly budget and the level of flexibility you want at the end of the agreement.

Is Finance Lease only available to businesses?

Finance Lease is primarily designed for business customers.

Can I include maintenance?

Yes. Optional maintenance packages are available to help budget for servicing, maintenance and repairs.

Is Finance Lease suitable for vans?

Yes. Finance Lease is particularly popular with vans, pick-ups and commercial vehicles where mileage and future resale values can be more difficult to predict.

Can I claim VAT on a Finance Lease?

VAT treatment varies depending on your business and the vehicle being funded. You should always seek professional tax advice.

What is Finance Lease?

Finance Lease is a business vehicle funding solution that allows you to spread the cost of a car, van or commercial vehicle through fixed monthly payments while retaining greater flexibility at the end of the agreement.

Unlike Contract Hire, where the vehicle is returned to the funder, Finance Lease gives your business greater involvement in the vehicle's future value and disposal. This makes it a popular funding option for vans, pick-ups and commercial vehicles where annual mileage, vehicle condition and future resale values can be more difficult to predict.

Finance Lease is often chosen by businesses looking for predictable monthly costs, greater flexibility around vehicle usage and more control over their end-of-agreement options.

Does Jurni offer Finance Lease?

Yes. Jurni offers Finance Lease on a wide range of cars, vans, pick-ups and commercial vehicles from leading manufacturers.
Our leasing specialists can help you compare Finance Lease with other business vehicle funding options, including Business Contract Hire, to help identify the most suitable solution for your business.

With access to a broad panel of funders and dealer partners, Jurni can help secure competitive pricing while providing impartial advice, expert guidance and dedicated support throughout the agreement.

What are the benefits of Finance Lease?

Finance Lease offers a number of benefits for businesses, particularly those operating vans, pick-ups and commercial vehicles where annual mileage, vehicle usage and future resale values can be difficult to predict.

Key benefits include:

• Fixed monthly payments to support budgeting and cash flow
• Greater flexibility at the end of the agreement
• No end-of-contract damage inspections or recharges
• Greater flexibility around vehicle condition and annual mileage
• Potential VAT advantages for some VAT-registered businesses
• The opportunity to benefit from strong resale values, depending on the agreement structure

Finance Lease is particularly popular with businesses whose vehicles work hard for a living and where mileage, usage and wear and tear can be difficult to predict.

How is Finance Lease different to Contract Hire?

The main difference between Finance Lease and Contract Hire is the level of involvement your business has in the vehicle's future value and disposal at the end of the agreement.

With Contract Hire, the vehicle is returned to the funder at the end of the contract and the business has no involvement in its future value or disposal.

With Finance Lease, the vehicle is sold at the end of the agreement and the final outcome is linked to the value achieved. Depending on the agreement structure, your business may benefit from a share of any surplus value if the vehicle sells for more than anticipated, or be responsible for a shortfall if it sells for less.

Contract Hire is often the preferred option for businesses looking for maximum simplicity, predictable costs and a straightforward vehicle return process. Finance Lease can be a better fit for businesses covering higher or unpredictable mileage, operating commercial vehicles, or wanting greater flexibility at the end of the agreement.

Need help choosing the right funding option?

Speak to a Jurni leasing specialist today and we’ll help you identify the most suitable solution for your business.

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