Finance Lease Explained

Finance Lease Explained

Finance lease is not the most popular lease, but it is perfect for some requirements. Finance lease, or FL, offers a more flexible way to finance a vehicle. We have therefore created the above video ‘Finance Lease Explained’.

The contract is similar to contract hire in which your company pays fixed monthly rentals for a certain amount of time. However, the difference comes at the end of the contract.

At the end of the agreement, you will have a final rental. This is larger than your monthly rentals.
The balloon is set by you, and is determined by how much you want to put down initially and how much you are paying monthly. You can pay for this balloon payment by selling your car onto a third party. If it’s a van, you can keep the vehicle and clear the balloon using your own funds or getting a loan to clear it.

Alternatively, you can pay something called a peppercorn rental. This is normally the cost of one monthly payment. It allows you to keep the vehicle for one more year. After that, you can either pay another peppercorn rental or pay the final balloon rental.