When lower capital outlay is a higher priority.
Leasing is an option when ultimately owning the asset isn’t vital and you want to benefit from a low cost of entry and lower rentals – compared to say a standard fixed rate hire purchase or term loan covering the full capital cost.
An operating lease is a lease with fixed rentals reflecting a predicted future residual value, which is an amount that remains unpaid by you; therefore, rentals are reduced.
The residual risk is typically taken by the lessor i.e. JCB Finance, who will attempt to sell the asset at the end of the agreement in order to realise this unpaid amount. You, the customer are protected from any potential loss (the difference between the predicted future value vs actual achieved). This transfer of risk may allow you to treat the asset as off-balance sheet, which may facilitate significant improvements on some of the key accounting ratios such as return on capital employed. Speak to your accountant or tax advisor to see how this may apply to your individual circumstances.
Operating leases typically enjoy a low initial capital outlay, and the VAT, which is paid on each rental, is therefore spread over the period of the lease. If a qualifying asset is used for business purposes, and you are VAT registered (special rules apply), you may be able to recover some, or all the VAT applied to the lease rentals.
The rentals may also be offset against taxable profits, which may be a tax-efficient form of leasing for your business. The availability and value of tax relief will depend on your individual circumstances; you can request a copy of the contract terms without any obligation so that you can discuss this with your accountant or tax advisor.
Return conditions apply and you will not own the asset at the end of the agreement.
Benefits of Operating Lease:
What happens at the end:
Upgrade or replace the existing goods and continue to benefit from flexible finance, or
Return the goods to JCB Finance and avoid any ownership responsibilities, disposal costs or residual losses. Note however return conditions apply and are clearly stated on the agreement.
Want to end the lease early?
Leases are for a period of hire as stated on your agreement, but you can end the agreement early giving 7 days written notice and paying all remaining rentals and costs due in accordance with the terms and conditions of the agreement – ask for details.
You can request a calculation at any point during the agreement which will show you how much you would need to pay if you wanted to end the agreement early.
Thinking of ending early? Request a cancellation
How it compares:
Other considerations:
Assets on the agreement may be repossessed if you do not keep up with the payments
Typically, the minimum balance to finance on any agreement type with JCB Finance is £5,000.
Help for sole traders and small partnerships:
JCB Finance provides asset finance to UK business users in agriculture, construction, and industry on JCBs and complementary assets to help their businesses thrive. So, if you are a sole trader or partnership of three or less and the total payable is below £25,000 we may be able to assist you with a Operating Lease facility regulated by the Consumer Credit Act 1974.
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