Lease Finance — what you need to know

Lease finance is a way to use business-critical assets — vehicles, machinery, equipment — without purchasing them outright. Unlike hire purchase, you do not own the asset at the end of a lease agreement. Instead, you pay for the right to use the asset over an agreed term, then return, upgrade, or extend. For businesses that want to keep their balance sheet lean, avoid obsolescence risk, or match costs to the income the asset generates, leasing is often the preferred choice.

Read the page or click the links below to jump to the section you need.

• What is lease finance?
• Finance lease vs operating lease
• Why lease rather than buy?
• What can be leased?
• What does it cost?
• Who can apply?
• How to apply

Want more detail? Read our The Lease Finance 100 — 100 questions and answers about lease finance.

What is lease finance?

A lease is a rental agreement for a business asset. The lender (the lessor) purchases and owns the asset. You (the lessee) use it and pay a monthly rental for the agreed term. At the end of the term, you typically have the option to return the asset, extend the lease, or purchase it at its residual value — depending on the type of lease. You never own the asset during the lease period, which means it may be kept off your balance sheet and depreciation risk sits with the lessor.

Finance lease vs operating lease

Finance lease — designed for assets you intend to use for most or all of their useful economic life. You bear the risks and rewards of ownership without legally owning the asset. At the end of the term you normally receive a substantial share of the proceeds from the asset’s sale. Best for vehicles, plant, and long-life manufacturing equipment. Operating lease — a shorter-term arrangement, typically 1–3 years. You use the asset and then return it, with the lessor bearing the residual value risk. Often used for IT equipment, technology, and copiers where rapid depreciation makes ownership unattractive.

Why lease rather than buy?

Leasing preserves cash — you avoid a large upfront purchase. Monthly payments are fixed and predictable, which simplifies cash flow forecasting. You can upgrade to newer models at each lease renewal, ensuring your business always operates with current equipment. For operating leases, the asset may sit off-balance-sheet. Lease rentals may also be fully deductible as a business expense — speak to your accountant for advice on your specific situation.

What can be leased?

The most commonly leased assets include: commercial vehicles, vans, and company cars; IT hardware, servers, and telephony systems; office equipment and photocopiers; agricultural machinery and plant; medical and dental equipment; and catering and hospitality equipment. For asset purchases where you want eventual ownership, see our Asset Finance page.

What does it cost?

Lease rental payments depend on the asset’s purchase price, the lease term, the expected residual value at the end, and current rates. For operating leases in particular, the monthly rental is often significantly lower than an equivalent hire purchase payment, because you are only paying for the use of the asset. Promise Money will provide a full rental schedule and total cost of lease before you commit to anything.

Who can apply?

Lease finance is available to UK-registered limited companies, LLPs, sole traders, and partnerships. Most mainstream lenders require a minimum of two years’ trading history. Start-up leasing is available through specialist lenders on our panel. The asset type and your credit profile will determine which lenders are appropriate.

How to apply

Complete the enquiry form on this page or call us on 01902 585020. There is no broker fee to businesses for lease finance and no obligation at any stage. We will match you to the most appropriate lender and product from our panel, with clear costs and terms. Subject to status.

Promise Money is authorised and regulated by the Financial Conduct Authority (FCA Ref: 681423).

For more in-depth guidance, explore The Lease Finance 100 — expert answers to 100 common questions.