business vehicle in belfast
Finance Lease
business vehicle in belfast.This is purely a financial arrangement whereby the lessor provides finance to the lessee for the purpose of purchasing a car over an agreed period at the end of which the car is sold and the agreement terminates. There are two methods:business vehicle in belfast
The total amount borrowed is fully repaid over the agreed period and any Residual Value realised at the end of that period on the sale of the vehicle is rebated to the lessee as a ‘Rebate of Rentals’. If the user wishes to continue using the vehicle at the end of the agreed period, rather than it being sold, it may be agreed to continue on the payment of a `peppercorn’ rent (normally about 1 % of the original value) until the car ceases to be of use, at which time it is then sold with all or part of the realised value being returned to the lessee as a ‘Rebate of Rentals’.business vehicle in belfast
The alternative method (and most commonly used) is only the estimated amount of depreciation is repaid in the agreed period with one large terminal rental (balloon) being paid at the end of the agreed period. The lessee will then receive back a ‘Rebate of Rental’ out of the proceeds of the sale of the vehicle, which if all works out as expected would be roughly the same as the terminal rental payment. The same circumstances as above apply here if the user wishes to continue using the vehicle beyond the agreed period.
It can be seen that with both of these devices it is the Lessee that takes the Residual Risk and it is on this basis that Finance Leases are required to be disclosed on the users Balance Sheet by the fact of who takes this risk. business vehicle in belfast
Other fleet funding options business vehicle in belfast