Hello! Welcome to ArbLease blog!

This is a quick article about leasing. It’s a huge topic in the office. A common question we get is what product shall I go for? Because we offer hire purchase and we offer lease. This blog post explains some of the differences between the two and why lease is our most popular choice product.

Why is ‘Finance Lease’ the most popular product we offer?

Well, the first thing to not get confused with is, this is not a contract hire and this is NOT personal contract purchase. There are no lump sums to make at the end and you don’t hand the machine back, it’s yours to keep. We don’t want it.

That’s the first thing to remember.

The other thing to remember is there are millions of leases out there, however, this is a specific lease to ArbLease and don’t think that this is the way leases work everywhere, its specific to us.

The first main benefit of a Finance Lease is it reduces deposit heavily because you don’t have to find all of the VAT up-front. Instead, the VAT is spread across the term of the agreement. You don’t have to find the VAT up-front so vastly reduces the deposit in comparison to HP (Hire Purchase). This is why it’s extremely popular with businesses who are not VAT registered.

Here’s an example, imagine you’re purchasing a £15,000 machine. You put a £1,000 deposit down and then let’s just say it’s £250 a month (that’s not exact figures but it’ll do for this example).

  • LEASE:

That’s £1,000 deposit plus VAT followed by £250/month plus VAT for a five-year finance agreement TOTAL UPFRONT DEPOSIT: £1200.00


That’s a £1000 cash deposit plus ALL the vat £3000 followed by £250/month for a five-year finance agreement – TOTAL UPFRONT DEPOSIT: £4000.00

The next main benefit of a Lease is the fact you write off each payment against tax as you make it. So every year you’ve got all the monthly payments to right off against taxes. Don’t forget this also means if you were to become VAT registered you could then start reclaiming the VAT on your rentals.

Here’s the big one! The next benefit is that at the end when you sell it, YOU keep all the money or the vast majority! Some finance companies give you 100%, most do, some give your 99%, but the vast majority of the money is yours to keep. If you don’t want to sell it at the end of the 5 years and you want to keep it, the finance companies will charge you a small rental each year to continue to lease it which us usually 1% of the original cost of goods. For example, if the equipment cost £15000.00 you yearly rental would be just £150.00 + vat. That’s sometimes called a peppercorn rental or secondary rental.  So you get all the benefits of ownership without the downsides.

Think of it a bit like a mortgage on your house. You will always have the equity or if you finish your mortgage, you will then have the full equity or the full ownership of the property but usually people will say, can we pay you a small amount of money each year to continue to look after the deeds in case we have a fire or a lose them. Well, that’s a bit like how our lease works.

So it’s all the benefits of ownership, it’s yours on day one. You’ve got to insure it, you’ve got to look after it and at the end of the finance term, when you sell, you keep all or the vast majority of the money. So it’s a great product and that’s why it’s the most popular in Arb!

FYI: ‘Finance Lease’ is also known as ‘Hire Agreement’.

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