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January 10th, 2024
If you’ve been looking into leasing, then you’ll certainly have come across the term Final Payment. This refers to the amount due at the end of your lease term and will have been built in as a part of your van leasing deal. The Final Payment is put in place at the end of your Finance Lease agreement in order to keep your monthly payments down. We’ll walk you through what a Final Payment means and how to plan for the end of your lease.
A Finance Lease is one of the 3 main funding solutions available in business van leasing (alongside Contract Hire and Hire Purchase). These three types are most easily distinguished by what happens at the end of your lease. As the most flexible option, a Finance Lease can have a final payment built in. This will keep your monthly payments down and you’ll have the option to refinance or settle this at the end of your lease.
Looking at the breakdown of a Finance Lease, you’ll be able to see how a Final Payment is worked out and how this could keep your monthly payments down.
As with all van leasing agreements, you’ll pay an Initial Rental (often 3x the quoted monthly cost) followed by fixed monthly payments for the length of the agreement (usually 2-5 years). Your Final Rental will be based on the residual value of the vehicle at the end of your lease.
Yyou are responsible for your vehicle at the end of a Finance Lease, therefore the final payment is put in place to allow for flexible end of lease options.
If the value of the van is higher than the estimated residual value at the end of your lease you are able to sell it on and reap the rewards, however if you have exceeded the quoted mileage and reasonable damage the residual is estimated upon, then you will be liable for the amount above the value of your vehicle.
Choosing the right van leasing deal is important, and one of the main factors to consider should be what you’d like to happen at the end of your lease.
Contract Hire vehicles are always returned to the finance company, and Hire Purchase vehicles are owned at the end of the agreement. Finance Lease deals offer flexible end of lease options, so you should decide which of these options would work best for you and your business.
Trade in: If you would like to trade in your van and take out a new business van lease, you can part-exchange the vehicle with us for a new model. You will be able to benefit from any equity in the vehicle, which you can put towards the deposit on your new vehicle. This is a great option if want to benefit from new van leasing deals and want to ensure your business’s vehicles are always up to date.
Sell the vehicle: At the end of your van lease, you have the option to sell your vehicle on. You can advertise the vehicle privately and sell on behalf of the leasing company. You’ll need to settle the Final Rental and send the leasing company a small percentage of the sales invoice value (usually between 2% and 5%).
Refinance: The last option for a Finance Lease would be to refinance the Final Rental. To extend the lease, we would provide you with a quotation to refinance the Final Rental over a further agreed leasing period (subject to credit approval). If ownership is the goal at the end of this period, please speak to our Renewals Team about the end of your Global Vans leasing deal.
More questions about van leasing or how to plan for the end of your lease? Get in touch with our experts by calling 01179625314 or contact us Here.
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