A lease with fixed instalments reflecting a predicted future residual value which remains unpaid by you. Return conditions apply.
The residual risk is taken by JCB Finance who recover the machine at the end of the period and attempt to sell it in order to realise this unpaid amount. This transfer of risk may allow the customer to treat the asset as off balance sheet - which can facilitate significant improvements on some of the key accounting ratios like return on capital employed. In addition the cost of the instalments can be offset against taxable profits. This tax efficient form of leasing is popular with Local Authorities due to their limited capital budgets and regulations that dictate the removal of residual value risk. It is also much used by public limited companies where accounting ratios are avidly scrutinised by the stock market. If required, repair and maintenance contracts may be added to this type of agreement which then becomes better known as Contract Hire – a very good way of placing a ceiling on the majority of costs, apart from the fuel and operator, of operating plant and machinery.