This can be a cost effective option if you are looking for minimum outlay, tax benefits, but do not want eventual ownership of the vehicle.

Rentals can be paid monthly, quarterly or annually throughout the agreement which is based on the estimated useful life (normally 2 – 4 years). You may also reduce the monthly payments by making a “balloon” payment at the end of the agreement.

Financing costs are calculated on the VAT exclusive amount significantly reducing your monthly payments.

The vehicle is classed as a balance asset during the agreement, allowing you to offset the rentals against taxable profit.

If the car is used exclusively for business you may reclaim 100% VAT. If the car if also used privately, 50% is recoverable.

On disposal of the vehicle the bulk of the sale proceeds will be refunded to you as a rebate of rentals. This rebate will attract VAT.