Financial Lease: Advantages and Disadvantages for Businesses

What are the main advantages?

One of the biggest benefits of financial lease is the preservation of your liquidity. You don't have to immediately pay the full purchase price, which frees up capital for daily business operations. Additionally, the vehicle is recorded on your balance sheet as a company asset.

Because the car is your property, you are entitled to various tax benefits. These include depreciation, interest deduction, and potentially investment deductions. For more information, please review the financial lease options to see how this fits your situation.

• Preservation of working capital within the business
• Tax benefits such as depreciation and interest deduction
• Unlimited mileage without recalculation

What are the disadvantages and risks?

Against the tax benefits, as the economic owner, you are personally responsible for maintenance, repairs, and car insurance. These operating costs are not included in the monthly lease instalment.

You also bear the risk of the car's depreciation. If the market value decreases faster than expected, this can impact the eventual trade-in value.

Who is financial lease suitable for?

Financial lease is highly suitable for entrepreneurs who focus on asset accumulation and tax benefits. Both start-ups and established companies often choose this form because customisation in terms of duration and residual value (slottermijn) is possible. Consult your advisor or the current rules of the Belastingdienst (Dutch Tax Authorities) to determine what best suits your needs.

How does applying for and concluding a financial lease work?

The process of applying for a financial lease typically begins with completing an online form or a consultation with a lease advisor. During this stage, information about the business, such as its KvK-nummer (Chamber of Commerce number), financial situation, and desired business assets, is collected. This information is crucial for a credit assessment, which determines whether the business qualifies for financial lease and under what conditions. A positive assessment paves the way for the next step in the process.

Upon approval of the application, a concrete offer follows, clearly specifying the lease price, duration, any down payment, and the monthly instalments. Once this offer is accepted, the lease agreement is drafted and signed. As soon as the agreement is finalised, the business asset is purchased and registered in the name of the business. The entrepreneur then pays the agreed monthly instalments over the course of the lease term.

What important tax considerations are there with financial lease?

Financial lease offers specific tax advantages for businesses because the company becomes the economic owner of the asset. This means the asset can be capitalised on the balance sheet, allowing depreciation on the asset to be charged against profits. This reduces the taxable profit and, consequently, the payable corporate income tax or income tax. In many cases, the VAT paid on the purchase can also be directly reclaimed from the Belastingdienst (Dutch Tax Authorities).

In addition to depreciation and VAT reclaim, the interest components of the lease instalments paid are also tax deductible. It is important to realise that financial lease does not grant the right to investment deductions, as it is technically not a direct investment but a financing arrangement. Nevertheless, depreciation and interest deduction remain important tax benefits that contribute to a lower tax burden. Always consult a tax advisor for your specific business situation.

• Capitalise the business asset on the balance sheet
• Depreciate over the lease term
• Interest costs are tax deductible
• Possibility of reclaiming VAT (if applicable)

Frequently asked questions