Leasing involves buying the use of a vehicle and not the vehicle itself. Unlike Contract Hire and Contract Purchase the risk always remains with the customer.
If the vehicles makes a profit or loss on disposal then the customer either suffers the loss or enjoys the benefit of the profit. (e.g If the balloon payment on the agreement is £15,000 and the vehicle sells for £14,000 then the customer suffers a loss of £1,000. The customer however retains 97.5% of The Sales of Proceeds.) If the customer decides to keep the vehicle then he enters into a Secondary Period Rental which is payable annually in advance. The Secondary Period Rental (SPR) is the same as the regular monthly payment.
*The Lessee pays a monthly rental for the use of a car which remains the property of the owner
*Rental charges are allowed in full against profits for cars costing up to £12,000.00 (half the excess rule)
*Leased vehicles have to capitalised on the balance sheet
*Legal ownership remains with leasing company but risk remains with customer on residual value
*Where a vehicle is used for business and private use, then only 50% of the VAT rental can be recovered