What is financial lease?

How does it work?

You agree on a purchase price, any down payment, term, and residual value. This results in a fixed monthly payment. The leasing company remains the legal owner until the final instalment has been paid. You can read more background information on what is financial lease.

What do you arrange yourself?

With financial lease, you only finance the car. You arrange and pay for insurance, maintenance, tyres, and motor vehicle tax yourself.

Who is it suitable for?

Financial lease suits entrepreneurs who:

• ultimately want to own the car;
• want to preserve their working capital;
• choose their own maintenance and insurance;
• want to finance a used car or import vehicle.

What are the advantages and disadvantages of financial lease?

Financial lease offers entrepreneurs several advantages. The most important is that you immediately become the economic owner of the vehicle. This means you can benefit from tax advantages, such as investment allowance (if applicable) and depreciation. You spread the investment over a longer period, thus preserving liquidity and allowing you to use the vehicle for business operations immediately, which is beneficial for the business.

On the other hand, financial lease also has disadvantages. Since you are the economic owner, you are responsible for maintenance, repairs, insurance, and road tax yourself. Additionally, the vehicle remains on the balance sheet, which can affect your company's financial position. You are also bound by the lease agreement for the agreed term.

• Tax benefits through investment allowance and depreciation
• Preservation of liquidity through spread payments
• Self-responsible for all operational costs
• Vehicle remains on the company's balance sheet

Can I terminate a financial lease agreement early?

Terminating a financial lease agreement early is generally possible, but almost always involves costs. The exact conditions and costs are described in your lease contract. Often, you will need to repay the outstanding balance of the lease plus any contractual penalties or administrative fees in one lump sum. This makes early termination financially less attractive.

If you are considering early termination of your financial lease agreement, it is advisable to contact your leasing company directly. They can inform you about the exact procedure, the precise costs, and possible alternatives, such as transferring the lease contract to another party. However, the latter is not always permitted and requires the leasing company's approval.

Frequently asked questions