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Leasing

Leasing

Leasing is a sub-category of asset finance.

Leasing or renting assets such as machinery or office equipment can save you the initial costs of buying them outright. In addition, asset finance may have other benefits for your business (cash flow, tax, etc.).

Advantages

Advantages of leasing or hire purchases include:

  • access to a high standard of equipment that you might not be able to afford otherwise
  • interest rates on monthly instalments are usually fixed
  • typically less risky compared to bank loans – if you can’t make payments you’ll lose the asset but not, for example, your home
  • the leasing company carries the risk if the equipment fails or breaks down
  • as long as you pay regularly, the agreement can’t be cancelled
  • it’s widely available

Disadvantages

Disadvantages include:

  • you can’t claim capital allowances on a leased asset if the lease period is less than 5 years (or 7 years in some cases)
  • it can be more expensive than buying the asset outright
  • some long-term contracts can be difficult to cancel early
  • you may have to pay a deposit or make some payments in advance

Need more information? Please visit the leasing and asset finance page on www.gov.uk