Lease Purchase Vs Finance Lease.
Discussion
I am just starting to set up a little business and i have chosen a new van.
But the sales guy said it was cheaper to use Lease Purchase rather than Finance Lease, but looking on the manufacturer website, you can configure finance examples and finance lease works out cheaper / month with the same deposit, terms etc than Lease purchase.
They have quoted the figures for both and with the dealer Lease purchase works out very much cheaper than finance lease.
Now, I know the set up with both leases and understand the criteria for disposal etc, but my question is why are they so opposed in terms of monthly costs?
I am not VAT regsitered if that helps, and they also know this.
But the sales guy said it was cheaper to use Lease Purchase rather than Finance Lease, but looking on the manufacturer website, you can configure finance examples and finance lease works out cheaper / month with the same deposit, terms etc than Lease purchase.
They have quoted the figures for both and with the dealer Lease purchase works out very much cheaper than finance lease.
Now, I know the set up with both leases and understand the criteria for disposal etc, but my question is why are they so opposed in terms of monthly costs?
I am not VAT regsitered if that helps, and they also know this.
You need to share more info...
Are you comparing like for like, as an example are you looking at Lease Purchase with a balloon which will give lower monthly cost vs finance lease with no balloon?
Do you need to own the van? If not go to a broker and contract hire one of their special offers, even without getting the VAT back will usually be cheaper than dealer.
Are you comparing like for like, as an example are you looking at Lease Purchase with a balloon which will give lower monthly cost vs finance lease with no balloon?
Do you need to own the van? If not go to a broker and contract hire one of their special offers, even without getting the VAT back will usually be cheaper than dealer.
EVLATECOMER said:
You need to share more info...
Are you comparing like for like, as an example are you looking at Lease Purchase with a balloon which will give lower monthly cost vs finance lease with no balloon?
Do you need to own the van? If not go to a broker and contract hire one of their special offers, even without getting the VAT back will usually be cheaper than dealer.
Hi thanks.Are you comparing like for like, as an example are you looking at Lease Purchase with a balloon which will give lower monthly cost vs finance lease with no balloon?
Do you need to own the van? If not go to a broker and contract hire one of their special offers, even without getting the VAT back will usually be cheaper than dealer.
Yes both had a balloon at the end, and the only difference between the two was the monthlies were cheaper with FL on the web.
A few years ago i used to Finance lease as the monthlies were cheaper although i did have the hassle of disposing of the vehicle at the end, but that wasn't a problem as it was always part ex'd and had a small amount of profit to fund the new one.
Ill have a look at some brokers.
Cheers!
Under a Finance Lease arrangement YOU get to depreciate the asset and offset against tax along with a portion of the monthly payment (interest). A huge benefit. If you go the other way the finance company get to deduct same.
Don't listen to the dealer-they don't know what they are talking about and most likely they DO know and are sending you down the path that makes them the most money.
Don't listen to the dealer-they don't know what they are talking about and most likely they DO know and are sending you down the path that makes them the most money.
Burwood said:
Under a Finance Lease arrangement YOU get to depreciate the asset and offset against tax along with a portion of the monthly payment (interest). A huge benefit. If you go the other way the finance company get to deduct same.
Don't listen to the dealer-they don't know what they are talking about and most likely they DO know and are sending you down the path that makes them the most money.
I don't think there are any capital allowance differences between the two.Don't listen to the dealer-they don't know what they are talking about and most likely they DO know and are sending you down the path that makes them the most money.
Abdul Abulbul Amir said:
Burwood said:
Under a Finance Lease arrangement YOU get to depreciate the asset and offset against tax along with a portion of the monthly payment (interest). A huge benefit. If you go the other way the finance company get to deduct same.
Don't listen to the dealer-they don't know what they are talking about and most likely they DO know and are sending you down the path that makes them the most money.
I don't think there are any capital allowance differences between the two.Don't listen to the dealer-they don't know what they are talking about and most likely they DO know and are sending you down the path that makes them the most money.
Capital Allowances and Depreciation are not the same thing.
Depreciation is a technique used by accountants to write off the value of an asset over its expected useful life in the business. It is an accounting technique and was never intended to have any tax effect.
Capital Allowances is the system used by HMRC to allow a business to claim tax relief on the cost of its fixed assets.
Depreciation and Capital Allowances follow different principles and vary (massively - in some situations) in in their calculations.
In most cases, HMRC does not allow the use of depreciation as a tax deductible cost and requires that the business makes such claims using the (often very) different Capital Allowance rules.
ONE area were HMRC DOES allow depreciation as a tax deductible cost is in the case of certain types of leases. This is yet another reason why anybody contemplating using a finance agreement to acquire an asset should know BEFORE they sign the agreement the exact nature of the agreement as that will determine what type of tax relief will be available.
Depreciation is a technique used by accountants to write off the value of an asset over its expected useful life in the business. It is an accounting technique and was never intended to have any tax effect.
Capital Allowances is the system used by HMRC to allow a business to claim tax relief on the cost of its fixed assets.
Depreciation and Capital Allowances follow different principles and vary (massively - in some situations) in in their calculations.
In most cases, HMRC does not allow the use of depreciation as a tax deductible cost and requires that the business makes such claims using the (often very) different Capital Allowance rules.
ONE area were HMRC DOES allow depreciation as a tax deductible cost is in the case of certain types of leases. This is yet another reason why anybody contemplating using a finance agreement to acquire an asset should know BEFORE they sign the agreement the exact nature of the agreement as that will determine what type of tax relief will be available.
Burwood said:
Abdul Abulbul Amir said:
Burwood said:
Under a Finance Lease arrangement YOU get to depreciate the asset and offset against tax along with a portion of the monthly payment (interest). A huge benefit. If you go the other way the finance company get to deduct same.
Don't listen to the dealer-they don't know what they are talking about and most likely they DO know and are sending you down the path that makes them the most money.
I don't think there are any capital allowance differences between the two.Don't listen to the dealer-they don't know what they are talking about and most likely they DO know and are sending you down the path that makes them the most money.
GranpaB said:
Thanks everyone, all input is appreciated!
Still confused!
So, for tax efficiency, FL is the way to go as i can deduct the full lease cost/month?
See, this is where i get completely lost wrt depreciation & assets etc!
Here's my take on the various permutations - Still confused!
So, for tax efficiency, FL is the way to go as i can deduct the full lease cost/month?
See, this is where i get completely lost wrt depreciation & assets etc!
Own outright - depreciation in accounts but not allowed for tax purposes/Capital Allowances claimed in tax computations instead
Purchased using bank loan - depreciation in accounts but not allowed for tax/loan interest and charges in accounts and allowed for tax/Capital Allowances claimed in tax computations
Purchased using Hire Purchase Loan - depreciation in accounts but not allowed for tax/HP charges only (not the full repayments) in accounts and allowed for tax/Capital Allowances claimed in tax computations
Lease Finance - depreciation in accounts and also allowed for tax /leasing charges only (not the full monthly repayments) in accounts and also allowed for tax
Operational lease/lease rental - no depreciation in accounts/no Capital Allowances claimed/full monthly payments to leasing company shown as an expense in the accounts and allowed for tax purposes. This is because the agreement is in the form of a rental set-up with no ultimate ownership forming part of the agreement
As I said, work out EXACTLY what type of agreement you are looking at.
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