Compare
Sale and leaseback of machinery and vehicles: how it works
Reviewed by Luca Scalzo, Director, WFYA Limited · Last reviewed
In a sale and leaseback, your business sells machinery or vehicles it already owns to a lender for an agreed value, then leases them back and keeps using them. The business receives cash straight away and pays it back through lease rentals over a fixed term.
It is one form of asset refinance. It suits businesses that have valuable equipment and need working capital, for example for growth, a large contract or to restructure debts.
How does sale and leaseback work step by step?
- 01
Valuation
The lender values the assets, sometimes with an independent inspection, and decides how much it can advance.
- 02
Sale and lease
Your business sells the assets to the lender and signs a lease. Any existing finance on them is usually paid off from the proceeds.
- 03
Cash and rentals
The balance is paid to your business. You keep using the assets and pay rentals until the end of the term.
How does sale and leaseback compare with refinance on hire purchase?
| Sale and leaseback | Refinance on hire purchase | |
|---|---|---|
| Who owns the asset during the agreement | The lender | The lender, until the final payment |
| End of the agreement | Return, further rental or sale with a share of proceeds, depending on the lease | Ownership comes back to your business |
| Tax (general rule) | Rentals usually a business expense; the sale itself can have tax consequences | Business is usually treated as owner for capital allowances |
| VAT | The sale may be subject to VAT if your business is VAT registered; VAT is then charged on rentals | Depends on how the deal is structured |
| Best for | Businesses happy not to own the assets again | Businesses that want to own the assets at the end |
The tax and VAT effects of selling an asset can be significant: always speak to your accountant before you proceed.
What assets can be used?
- HGVs, trailers and commercial vehicles.
- Construction equipment and heavy plant.
- Agricultural machinery.
- Manufacturing machinery and CNC machines.
Assets that hold their value, are easy to identify and have a clear second hand market are the easiest to use.
What are the pros and cons?
- Pros: releases cash quickly from assets already in the business; you keep using the assets; repayments are fixed.
- Cons: you no longer own the assets during the lease; the total of the rentals is more than the cash received; selling assets can have tax effects.
Sources
Checked on 31 October 2026.
Frequently asked questions
What is sale and leaseback in simple terms?
You sell something your business owns to a lender and rent it back. You get cash now and pay rentals over time, while continuing to use the asset.
How much cash can I release?
It depends on the market value of the assets, any outstanding finance and the lender. Lenders usually advance a proportion of the value rather than all of it.
Can I do sale and leaseback on machinery that still has finance on it?
Often yes, if the value is higher than the balance outstanding. The old finance is usually settled from the proceeds.
Is sale and leaseback the same as a loan?
No. With a loan you keep ownership and borrow against the business. With sale and leaseback the lender buys the asset, which is its security.
Is sale and leaseback only for property?
No. It is also widely used for vehicles, plant and machinery.
Talk to us about your asset
Tell us what you want to finance. Our team reviews every application and comes back to you.
Start your application