Leasing & Hire Purchase
Finance tailored to the unique nature of renewables
In the course of working on a number of projects where clients have sought advice from us, we have established relationships with a number of institutions interested in providing finance for renewable technologies. These providers are familiar with the residual value of such technologies, and are also comfortable with the non-standard nature of projects, especially wind turbines.
If we are requested to provide alternative funding quotations, we will calculate what the net cost per month will be over the term of the contract; taking into account incomes, savings, Climate Change Levy, carbon trading schemes and subsidies (such as Renewable Obligation Certificates).
The following is by no means an exhaustive list of finance options, it simply gives a flavour of the alternative funding models we can provide:
Hire Purchase (HP) is a well-established method of financing the purchase of assets. The customer pays an initial deposit, and the remainder of the balance and interest paid over a period of time. The finance company owns the asset until the final instalment is paid for the asset.
Benefits of Hire Purchase:
- The assets can be used immediately whilst allowing repayments to be staggered, for better cash flow
- HP agreements are easily negotiated and available
- The hirer can recover the writing down costs and VAT on the assets
- There is a clearly defined financial commitment from the outset
- Security is on the transaction that has been financed, thus requires no additional commitment from the customer
- HP is not repayable on demand unless the customer defaults on the agreement
A lease purchase is essentially the same as HP; the main difference is in the terms and structure of repayments. Some finance companies differentiate Lease Purchase from Hire Purchase, by using it where the customer wishes to defer payment of a substantial part of the asset cost until the end of the agreement.
The leasing company buys and owns the asset that the lessee requires. The customer hires the asset from the leasing company and pays rental over a pre-determined period for the use of the asset. The leasing company can sometimes claim capital allowances on the assets. These benefits are usually passed on to the lessee in the form of reduced repayments.
There are two types of leases: Finance Leases and Operating Leases.
Finance Leases – Under a finance lease the rental covers virtually all of the costs of the asset, therefore the value of the rental is equal to or greater than 90% of the cost of the asset. The leasing company claims written down allowances, whilst the customer can claim both tax relief and VAT on rentals paid.
Operating Leases – The lease will not run for the full life of the asset and the lessee will not be liable for its full value. The lessor or the original manufacturer or supplier will assume the residual risk. This type of lease will normally only be used when the asset has a probable resale value; such as wind turbines which in some cases have residual values of up to 45%.
Please contact us for more information.