Benefits Of Leasing
Join the majority. Some 85% of the Times Top 100 companies use lease finance to acquire business assets.
HAVE WHAT YOU NEED NOW
Have the equipment that is best for your business without capital expenditure. When you lease you are not restricted to the equipment you buy and can upgrade either in whole or in part to suit the needs of your changing business.
CASH IS KING
Use your cash where it will produce the best return in investment and operating activities.
KEEP YOUR OPTIONS OPEN
Retain your cash, bank facilities and other credit lines for more appropriate uses, such as working capital and short term funding needs. The equipment you need can be acquired without affecting other credit lines making further borrowing easier.
IMPROVE FINANCIAL CONTROL
Your finance payments will be fixed for the whole finance period avoiding the effects of inflation, making cash flow forecasting and budgeting simpler.
You are protected from interest rate changes so will always know how much your future payments will be.
REMAIN FLEXIBLE
You can upgrade to new equipment if your requirements change. In many cases, by extending the length of the facility, you can acquire extra equipment without an increase in your payments.
SEE IT PAY FOR ITSELF
Let the payments coincide with the benefits of having the new equipment as they appear. The payments may be self financing from the extra income obtained, or cost savings made, by having the new equipment.
TAX BENEFITS
On lease rental agreements all payments made are 100% allowable as an expense for tax purposes, often providing tax savings.
SPEED UP DECISION TIMES
If you have budgetary restrictions preventing capital outlay, leasing may be acceptable.
Lease Rental v Cash Purchase
Model showing differences in tax relief available with rates based on the assumption that the business has been trading over 3 years.
| This example assumes the following costs and rate of tax | |
|---|---|
| Invoice Value | £1,750.000 |
| Frequency | Monthly |
| Lease Period | 3 years |
| Highest Tax Rate | 19% |
| Figures exclude VAT and assume customer is a tax paying organisation | |
Lease Rental
Tax Relief is available on all rentals at the highest rate you pay.
| Year | Capital Allowance in year | Totals | Tax relief | |
|---|---|---|---|---|
| 1 | 12 months at | £63.25 | £758.94 | £144.20 |
| 2 | 12 months at | £63.25 | £758.94 | £144.20 |
| 3 | 12 months at | £63.25 | £758.94 | £144.20 |
| Total tax relief over 3 year period | £2,276.82 | £432.60 | ||
Cash Purchase
Tax relief is only available on the capital allowances on the equipment. For SMEs this is currently 40% of the cost in the first year and 25% in subsequent years based on a reducing balance each year.
| Year | Rentals payable in year | Totals | Tax relief | |
|---|---|---|---|---|
| 1 | 40% of | £1,750.00 | £700.00 | £133.00 |
| 2 | 25% of | £1,050.00 | £262.50 | £49.88 |
| 3 | 25% of | £787.50 | £196.88 | £37.41 |
| Total tax relief over 3 year period | £220.28 | |||
| TOTAL SAVED BY CHOOSING TO LEASE OVER CASH IS: | £212.31 | |||
|---|---|---|---|---|
