Finance Lease Vans
The most tax-efficient way to fund a commercial vehicle. Reclaim 100% of the VAT upfront and enjoy the lowest monthly payments of any lease product.
How finance lease works
A finance lease is similar to a long-term hire agreement. You pay an initial rental followed by fixed monthly payments over the contract term, typically 24 to 60 months. A balloon payment (usually 20 to 40% of the vehicle value) is deferred to the end, which keeps your monthly costs low. At the end of the primary period, you choose how to deal with the balloon.
Benefits of finance lease
Finance lease combines tax efficiency with low monthly costs, making it a powerful choice for VAT-registered businesses.
100% VAT reclaimable
Unlike contract hire, you can reclaim the full VAT on a finance lease upfront at the start of the agreement. This is a significant cash flow advantage.
Lowest monthly payments
Because a balloon payment (typically 20 to 40% of the vehicle cost) is deferred to the end, your monthly payments are lower than any other lease product.
Fully tax deductible
The full rental payment is an allowable business expense, reducing your corporation tax or income tax liability.
Off-balance sheet option
For many businesses, a finance lease can be structured to keep the vehicle off the balance sheet, improving financial ratios.
Flexible end-of-term
At the end of the primary period, you have several options including selling through an agent, refinancing, or continuing on a peppercorn rental.
End-of-term options
When the primary lease period ends, you have three straightforward choices.
Sell via an agent
The finance company sells the van on your behalf. Any sale proceeds above the balloon payment are returned to you as a rebate, typically around 95% of the surplus.
Refinance the balloon
If you want to keep the van, you can refinance the balloon payment over a further period. This means you continue with manageable monthly payments.
Peppercorn rental
Continue using the van for a nominal monthly rental (often as little as a few pounds). This is a popular choice when the van still has plenty of life left in it.
Who is finance lease ideal for?
Finance lease is a strong choice for any VAT-registered business that wants to maximise tax efficiency and keep monthly payments as low as possible. It is especially well suited to:
- Businesses that want to reclaim 100% of the VAT upfront
- Companies looking for the lowest possible monthly payments
- Fleets where vehicles are used solely for business purposes
- Businesses that want flexibility at the end of the term
- Operators who want to keep vans running beyond the primary period
Get a finance lease quote
Tell us about your requirements and we will put together a competitive quote.
Finance lease FAQs
The key differences are VAT treatment and end-of-term options. With finance lease, you reclaim 100% of the VAT upfront and have a balloon payment at the end. With contract hire, you reclaim 50% of VAT on rentals and simply hand the van back. Finance lease typically offers lower monthly payments but requires you to deal with the balloon at the end.
The balloon payment is a lump sum deferred to the end of the lease, usually set at 20 to 40% of the vehicle value. It is agreed at the start of the contract so there are no surprises. You do not have to pay it yourself. In most cases, the van is sold via an agent and the sale proceeds cover the balloon, with any surplus returned to you.
Strictly speaking, no. Under a finance lease, ownership remains with the finance company for the duration. However, you can refinance the balloon to continue using the van, or extend on a peppercorn rental for a nominal monthly amount. If you want outright ownership, hire purchase may be a better option.
Yes, finance lease is available to sole traders, partnerships, and limited companies. The business must be VAT-registered to benefit from the full VAT reclaim. All applications are subject to credit approval.
If the sale proceeds do not cover the balloon payment, you are responsible for making up the shortfall. This is rare for commercial vehicles held for a standard lease term, but it is something to be aware of. Choosing a realistic balloon figure at the outset helps to avoid this situation.
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Sion Jones Commercials Ltd is an independent commercial vehicle broker. We are not authorised or regulated by the Financial Conduct Authority and do not provide finance directly. Any finance arranged is provided through carefully selected third-party brokers and lenders who are authorised and regulated by the FCA. All finance is subject to status, affordability and lender approval. Full terms and conditions are available on request.