In today’s business world, keeping cash flowing while still accessing the right equipment is a balancing act. That’s where asset finance — and specifically the finance lease — comes in. A finance lease allows your business to use essential equipment, vehicles, or machinery without paying for them upfront. Instead, you spread the cost through regular, predictable payments. This makes it one of the most effective ways to invest in the assets you need to grow, without putting pressure on your working capital. Let’s take a closer look at how finance leases work, who uses them, and whether they could be the right fit for your business.
What is a Finance Lease
A lease is a contract between a finance company (the lessor) and you, the lessee.
You identify the asset and agree a price with the supplier. The lessor purchases the asset from the supplier and then allows you to use it in return for regular rental payments over an agreed period.
During the term of the lease, the asset typically remains on your business’s balance sheet, and the rental payments appear in your profit and loss account. You are responsible for maintaining and insuring the asset, along with complying with any return or usage conditions stated in the lease.
If payments are missed, the finance company may be able to repossess the goods, so it’s important to review the terms carefully before signing.
There are two main types of lease: Finance Lease and Operating Lease. In this article, we’re focusing on Finance Leases, the most common form of long-term asset finance. But don’t worry, we’ll also be covering Operating Leases in an upcoming blog.
What are the different Finance Lease types?
There are two common types of finance lease arrangements:
Minimum Term Lease: Once the initial lease term has expired, you can either return the asset to the finance company or continue using it for a smaller, secondary rental. This option is ideal if the equipment still has value or remains useful to your business.
Fixed Term Lease: In this case, the lease simply ends at the agreed term. The finance company retains ownership of the asset and is responsible for selling it. The asset cannot be sold to your business directly, but it may be sold to a third party.
Whichever option you choose, it’s important to note that you do not own the asset at the end of a finance lease — you are paying for its use, not its ownership.
Who Uses Finance Leases?
Finance leases are widely used across UK industries, providing flexibility and financial control for businesses that rely on expensive equipment. From logistics firms leasing fleets of vehicles, to manufacturers upgrading production lines, to farms investing in modern machinery, finance leasing supports growth across almost every sector.
According to the Finance & Leasing Association (FLA), nearly £3 billion in funding was provided to UK businesses through finance leases in the 12 months to August 2025. That figure highlights just how integral this form of asset finance has become to business investment.
Companies choose finance leases because they can acquire the assets they need without tying up working capital. The predictable repayment structure also makes budgeting easier, while preserving liquidity for other operational priorities.
How does it work in practice?
Your business selects the equipment or vehicle it needs and agrees a price with the supplier. The lessor buys the equipment directly from the supplier and becomes its legal owner. You enter into a lease agreement.
Your business leases the asset over an agreed term, making fixed monthly or quarterly payments. You use the asset. You have full use of the equipment and take responsibility for insurance, maintenance, and upkeep.
The lease ends. When the primary lease term expires, you can return the asset, enter a reduced-cost secondary lease period, or (in some cases) receive a share of any sale proceeds when the finance company sells the asset.
This structure offers flexibility by allowing businesses to upgrade, extend, or return assets as their operational needs evolve.
Is a Finance Lease Right for You?
A finance lease could be the right form of asset finance if your business:
- Needs long-term access to equipment, vehicles, or machinery.
- Wants to spread costs rather than paying a lump sum upfront.
- Prefers predictable, fixed payments for easier cash flow management. Is comfortable maintaining and insuring the leased assets.
- Wants to benefit from potential tax advantages (as lease payments are often deductible as business expenses). Please refer to your accountant for more details on the tax treatments for different forms of business finance.
However, if your main goal is to own the asset outright, or if you only need it for a short period, other asset finance options; such as hire purchase or operating leases, might be more suitable.
Speaking to a professional asset finance broker, such as Allied Business Finance, can help you understand which structure fits best with your business goals, equipment needs, and cash flow.
The Bottom Line
A finance lease is a practical and flexible way to access the equipment your business needs to operate, expand, and stay competitive – without the upfront burden of ownership.
It allows you to use valuable assets today, spread the cost over time, and maintain financial agility for the future. While the finance company retains ownership, your business enjoys full operational control, and often the ability to continue using the equipment well beyond the initial term.
In essence, finance leasing is a cornerstone of modern asset finance – helping businesses across the UK unlock growth through smart, sustainable funding.
If you’d like to explore how a Finance Lease could work for your business, get in touch with us at Allied Business Finance by completing the short contact form, and one of our specialists will be happy to help.
If you want to learn more about Asset Finance and how it can work for your business, don’t forget, we’ve already covered:
Asset Finance – what it is and why it could be the smartest way to drive your business growth
Hire Purchase: A Simple, Flexible Way to Fund Growth
We’ll also be covering Operating Leases, Personal Contract Purchase (PCP), and Refinancing in upcoming blogs.
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