Off-Balance Sheet Funding

Operating Lease

Operating leasing is an efficient way of financing a fleet of vehicles rather than tying capital up in depreciating assets as the company is able to invest in other areas of the business. It is a rental agreement with a fixed duration based on usage (KM/Hours) parameters being tailor-made to the specific requirements of the operating conditions of the vehicle operation. A residual value figure is built into the agreement so your monthly rental is significantly reduced, and the risk in the residual value remains with the finance company meaning you can maximize the fleet performance without the burden of ownership. End of contract options are to return the vehicle in line with return conditions of the contract, or to purchase the asset via a pre-agreed sales agency figure or to extend for monthly continuous usage.

The main considerations in structuring operating lease transactions are:

  • Cash flow impact of VAT is minimized as VAT on rentals is reclaimable
  • Lower monthly payments as a Residual Value is in place 
  • You can reduce your tax bill by offsetting rentals against taxable profits
  • The Finance Company takes the risk of ownership on the asset depreciation
  • No worry or risk at the end of the agreement or further extension, just give it back and pay any excess mileage and damage charges if applicable
  • Possibility to include additional services in the lease rental (such as a Dealer or third party Repair & Maintenance agreements)

Contract Hire including Repair and Maintenance

Similar to an Operating Lease, with this option you effectively lease your assets for a fixed period and fixed monthly rental. The rental includes the cost of your vehicle’s road fund licence and agreed repair and maintenance schedule for the duration of the agreement. At contract start you pay a small rental in advance upfront, and your monthly rentals are generally based on the difference between the initial value of the vehicle and its projected residual value at the end of your agreement plus interest. Therefore, only a proportional percentage of the agreement is amortised, this keeps monthly payments strictly in line with your operational budgeting requirements. Upon contract expiry simply return the asset, subject to it being in line with the return condition as the vehicle condition, excess mileage and other charges may be payable.

To find out how Advance Finance & Leasing could make a significant overall cost saving to how you currently finance your whole fleet, please get in touch at





Off-Balance Sheet Funding

The Advance full-service offering is providing our expertise in each phase of a vehicle's life cycle

Accounting Treatment, Acquisitions, Funding, Telematics, Maintenance and Disposal

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