Diagnostic

Financing: Leasing Is King

Published on 01 october 2015 at 0h00

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Leasing

In Europe, and particularly in France, leasing dominates the market. About two thirds of all new-buy finance deals are done through leasing. The reason is simple: it's the cheapest way to buy a new or nearly-new boat, or put another way, any boat which is liable for a purchase tax (eg: VAT in the UK). In fact, as long as you acquire the necessary safety equipment, for any boat which may leave territorial waters, (A, B or C category vessels which are 5 meters or longer) the tax on the repayments is reduced by half, so 10% instead of 20% for example. It's as though your boat has spent half of its life outside European waters. Before you get too excited, the VAT reduction applies to leasing repayments and not to a purchase. The financing is calculated on a tax-inclusive price eg: €600,000 for a boat which has an ex-VAT price of €500,000 where the VAT rate is 20%. It's worth noting that despite the concerns of some sailors, at the end of the lease period, the VAT has indeed been paid as far as all EU countries are concerned.

It's probably worth putting in a quick reminder here: What is the principle of leasing? The French definition is very succinct: it's a rental with a purchase option. A financial company purchases the boat which you wish to have, and rents it back to you against monthly repayments. At the end of the lease period, you have the option of handing back your boat to the leaser or exercising your purchase option. In sailing, as against in ...

This article appeared in issue 144. To read the article in full, buy this issue individually

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