Medialease Specialist Asset Finance

As specialist financiers to the broadcast and post-production sector, Medialease has been helping companies locate financing options for over twenty years.

The company understands the many requirements of this industry, together with how essential the specialist equipment you need is to the success of your business. When considering whether to rent or buy, it's important to also think about long-term rental or leasing options. These can have their advantages – spreading the cost of acquiring the kit is the obvious one – but importantly you can often claim back the full lease repayment costs as a legitimate trading expense.

Medialease's managing director, Paul Robson, looks at three most common options – hire purchase, finance leasing and medium term equipment rental – discussing the key features and benefits of each:

"Hire Purchase is typically used in the media industry to spread the costs of ownership over the first working life of the equipment, typically three years," Paul Robson explains. "The benefits of Hire Purchase are that you have all the accounting and tax advantages of owning the kit from day one as if you had bought the assets but spread the costs. This means the asset appears on your company’s balance sheet that day but there is a liability to the lease company for the term of the HP agreement, with the interest element charged to your expenses or overheads as a cost. The asset is depreciated in your normal manner. You can also claim Capital Allowances against this asset purchase, as if you had paid for it in cash, which can be advantageous from a corporation tax perceptive if you made decent profits in the year to enable you to claim such Allowances. At the end of the lease period, you simply pay an additional £50 to £100 as an ‘option to purchase’ and the kit is now all yours!"

With a Finance Lease agreement, there are mainly similarities, but the main difference is the way the Lease agreement is treated within the accounts. Paul continues, "Just as an example, if your monthly payment is £2,000, then the whole payment amount every month is treated as a business expense and shown in your accounts as such. So, at the end of the year when you have spent £24,000 in lease payments, that reduces your profits by this amount and thus any corporation tax liability is reduced as a result. Importantly, as it's not your asset to claim (yet), you can't claim any Capital Allowances on the purchase value of this asset since it was purchased by the lease company not yourself. Some funders can make it awkward for you to gain title to the asset at the end of the lease period but these days most are fair and may only seek one further payment or less to give you title to the asset after all payments have been met."

Another option when looking to finance equipment is to look at medium to long-term rental.
"Again, this is a finance company providing the funding to you but, similar to finance leasing, you are renting the kit, so all the leasing conditions still apply," Paul explains. "However, your rental payments are somewhat lower than with a finance lease since there is no ownership – the funder has placed a future residual value (“RV”) on what the equipment will be worth at the end of the term, and that is the amount they are owed and will need to recover from the asset sale at the end of the primary lease period with you. This is typically either by taking it back and selling it, or renting it to you for a further 12 -24 months, after which time you may be offered the purchase option for a modest sum. The funder can also rent it on to someone else if you are not interested in retaining the asset further beyond your primary lease term.

"With this form of financing, you normally find the monthly repayments are the lowest of the three options I've talked about. Medialease can of course advice its customers accordingly, offering dependable leasing information whatever a company's size and whatever asset classification they are looking to invest in."

Medialease enjoys close relationships with many major equipment suppliers and manufacturers, giving the company access to knowledge, new products and fantastic deals that you won’t find anywhere else. If you need some specific advice on leasing – confidential or otherwise – please contact the team at Medialease on 01327 872531 or visit www.medialease.com