Financial lease is a business leasing option that differs from what most consider leasing. With financial lease, the lessee automatically becomes the owner of the car at the end of the lease period. Essentially, financial lease is an installment plan. During the lease period, the leasing company remains the legal owner of the car. However, the customer is the economic owner, meaning they are responsible for costs such as insurance, taxes, maintenance, and repairs.
The financial benefits of financial lease
The reason companies choose financial lease is usually that it allows them to avoid making a large upfront investment, which helps prevent potential liquidity problems. Additionally, financial lease comes with a tax advantage: the VAT paid monthly is deductible. If you also use the car for private purposes, you will pay a monthly amount for taxable addition to income.
Prefer a car for the short term?
While the fact that you become the owner of the car over time and can thus access its residual value is often seen as an advantage, the downside is that you are committed to a fixed period, typically several years, of payment obligation. A good alternative for that could be short-term lease. With short-term lease, you can lease a car for as little as one month and have no further obligations. Interested? Then check out our business short lease options!