Is financial leasing suitable for sole traders?

What is financial leasing?

Financial lease is a popular way to finance a commercial vehicle without making a large initial investment. This type of lease allows business owners to use a vehicle in exchange for a fixed monthly payment. Unlike operating lease, where the leasing company retains ownership of the vehicle, with financial lease you become the economic owner of the commercial vehicle from the moment you start paying.

The difference with other forms of lease is mainly in the ownership structure. With financial leasing, ownership of the vehicle falls to you at the end of the lease period, meaning that you have full ownership at the end of the contract. This makes it an attractive option for business owners looking for a long-term investment in their fleet.

Why do self-employed people choose financial leasing?

For self-employed people, financial leasing offers numerous advantages. One of the main reasons self-employed people choose this option is the flexibility it offers. After all, you do not have to put down a large sum of money all at once, which keeps your working capital free for other business activities. Also, monthly costs are predictable, which makes budgeting easier.

Moreover, there are tax benefits to be gained. The interest from the financial lease is tax-deductible, reducing the effective cost. At the end of the lease, you fully own the company car, allowing you to benefit from the residual value or choose to trade the vehicle back in for a new lease.

How does financial leasing for company cars work?

The process of financial leasing for commercial vehicles is relatively simple. After you select a suitable commercial vehicle, a lease contract is drawn up. This contract specifies the term, monthly payments and any final instalment. It is important to note that you are considered the economic owner of the vehicle from the first payment.

The application process is usually quick and easy, meaning you don't have to wait weeks for approval. With us, you can even trade in your current car, which can help reduce costs further. The final instalment at the end of the lease offers extra flexibility; you can choose to trade in the car or pay the final instalment and take full ownership.

What are the costs and conditions of financial leasing?

The cost of a financial lease depends on several factors, including the commercial vehicle chosen, the term of the contract and the amount of the final instalment. Interest is an important part of the cost and is usually around 9.5% annually. However, thanks to tax deductions, the actual interest rate can be lower.

Besides the costs, there are also certain conditions you need to meet. For instance, it is important to have a stable financial situation and, if necessary, you can make a down payment to reduce the monthly charges. Make sure you fully understand the terms of the lease contract before signing it.

What are the risks associated with financial leasing?

As with any financial commitment, there are risks associated with financial leasing. One of the biggest risks is that you remain responsible for payments even if your business faces financial setbacks. So it is important to make a realistic assessment of your future income and expenses.

It is also important to realise that the company car will appear on your company's balance sheet, which may affect your financial structure. Finally, when the lease contract ends, you may have to deal with a final instalment to be paid, unless you choose to trade in the car.

How to choose the right financial lease option?

Choosing the right financial lease option starts with identifying your specific needs and budget. Consider factors such as the term of the lease, the type of vehicle you want to lease, and the expected growth of your business. It can also be useful to consider how much you are willing to put on to reduce monthly costs.

It is also wise to compare different leasing options and seek advice from a financial adviser if necessary. You can come to us for personal advice and tailor-made solutions to suit your specific situation. This way, we ensure that you get the right company car on the road, without hindering your financial freedom.