Refinancing a Financial Lease: How to Restructure Your Contract

Why refinance a financial lease?

There are various reasons to choose to refinance your business vehicle. Perhaps you want to reduce monthly instalments to increase liquidity within your company, or you might want to finance a balloon payment at the end of the contract term.

A change in your monthly mileage or business structure can also be a reason to realign the agreed terms with a financier.

How does the restructuring process work?

When restructuring, a leasing company requests an exact settlement statement from your current financier. This statement shows the remaining principal and any termination fees. Subsequently, a new contract is drawn up to fully settle the old debt.

Consult the page on financial lease services to see how a refinancing for your vehicle can be structured.

Key considerations when refinancing

When restructuring, always account for potential administration fees or early termination charges from the current financier. Additionally, check whether the new term aligns with the expected economic lifespan of the vehicle.

Ensure you are well-informed by consulting the current rules of the Dutch Tax Authorities (Belastingdienst) or by seeking advice from your financial advisor.

When is refinancing a financial lease worthwhile?

Refinancing a financial lease agreement is not always the most advantageous option in every situation. Consider this step primarily when market interest rates have significantly decreased since the start of your current contract, or when your company has built up a substantially improved creditworthiness. These factors can lead to significantly better terms for new financing. A change in business strategy, where, for example, a longer depreciation period is desired, can also be a motive.

Additionally, refinancing can offer a solution if the monthly costs of the current contract place too heavy a burden on your company's liquidity. By opting for a longer term or a contract with a lower interest rate, financial pressure can be reduced. It is crucial to consider the total costs over the entire new term and not just the immediate monthly saving. A thorough analysis of the current and potential new terms is essential.

What costs are associated with refinancing a financial lease?

When refinancing a financial lease contract, you should take various cost items into account. A common cost factor is the penalty interest, also known as early repayment charges. This fee compensates the current lease provider for the loss of future interest income. The amount of this fee depends on the remaining term, the outstanding balance, and the interest terms of the original contract. It is advisable to request the exact calculation method from your current lease partner.

In addition to penalty interest, the new financier may charge setup fees or administration costs for assessing your application and drawing up the new agreement. There may also be costs associated with revaluing the asset if this is required for the new financing. Transparency about all these costs prior to the refinancing process is of great importance to gain a complete picture of the financial impact of the refinancing.

• Penalty interest / early repayment charges
• Administration or arrangement fees for new financing
• Potential valuation costs of the leased asset

Frequently asked questions