Lease types: financial lease or operational lease?
Two lease types, two philosophies: with financial lease you buy in instalments and become the owner, with operational lease you rent a fully serviced vehicle for a fixed amount. Below are the differences that matter in practice.
Financial lease in brief
You choose a commercial vehicle (with us usually from stock), the lease company finances the purchase and you pay a fixed monthly amount. The vehicle is in your name and on your balance sheet; after the final instalment and the balloon payment it is fully yours.
Suitable for business owners who drive a lot, want to arrange maintenance and insurance themselves and value ownership and tax deductions (interest, depreciation, investment allowance where applicable).
- Fixed monthly amount, term 24 to 72 months
- Owner after the balloon payment; no mileage limit
- Maintenance, tyres, insurance and road tax at your own expense
- You pay the VAT on the purchase up front and reclaim it
Operational lease in brief
You drive a (usually new) commercial vehicle for a fixed monthly price that includes depreciation, interest, maintenance, tyres and roadside assistance; insurance and road tax can be included. At the end of the term you return the vehicle.
Suitable for businesses that want predictable costs, no maintenance worries, a clean balance sheet and the option to switch to a new vehicle every few years.
- All-in monthly price; term 12 to 60 months
- Annual mileage allowance; excess and unused kilometres are settled
- The vehicle remains the property of the lease company; monthly instalments are expenses
- No VAT pre-financing on the purchase price
The differences side by side
Ownership: financial lease: you (economic owner, full owner after the balloon payment). Operational lease: the lease company.
Balance sheet: financial lease: asset and liability on your balance sheet. Operational lease: off balance sheet, monthly amount as an expense.
Mileage: financial lease: unlimited. Operational lease: annual mileage allowance.
Maintenance and tyres: financial lease: arranged by you. Operational lease: included.
Residual value risk: financial lease: yours. Operational lease: the lease company's.
End of term: financial lease: pay the balloon payment and keep the vehicle. Operational lease: return or extend.
Which lease type suits you?
Choose financial lease if you want to keep the vehicle for a long time, drive a lot, want control over maintenance and value ownership. Choose operational lease if you want fixed, predictable costs without residual value risk and without maintenance worries. Not sure? Calculate the monthly amount for financial lease and also request an operational lease quote; we will put both side by side.
Frequently asked questions
Can I take a used commercial vehicle on operational lease?
In limited cases, yes, for young vehicles from our stock. Request it through the operational lease quote; we will tell you whether the vehicle qualifies.
Which is more tax efficient?
That depends on your situation. With financial lease you deduct interest and depreciation and can sometimes use investment allowances; with operational lease the full monthly instalments are expenses. Consult your accountant; we supply the figures.
Can I end the contract early?
With financial lease you can usually settle the contract early. With operational lease early termination is possible against a settlement fee; the conditions are in the lease company's contract.