How sale-and-leaseback works for logistics vehicles & MHE in the UK

Summary: A sale‑and‑leaseback lets a logistics business sell vehicles or material handling equipment (MHE) to a specialist funder and immediately lease the assets back, freeing cash while keeping operations running. Typical deals release 50–80% of market value, run for 2–7 years, and can be structured as operating or finance leases. UK Business Loans can match your business with specialist brokers and lenders for a free eligibility check — Get Quote Now.

Introduction & key benefit

If your logistics business needs working capital but you must keep using your vans, HGVs, trailers or forklifts, a sale‑and‑leaseback can be an effective solution. It converts asset value into cash quickly while allowing your team to continue operating the same equipment under lease. This guide explains how these deals typically work in the UK, commercial terms you can expect, accounting and VAT points to consider, common risks and alternatives, plus a short example to illustrate the numbers. Ready to explore options? Free Eligibility Check.

What is a sale‑and‑leaseback?

A sale‑and‑leaseback is a two‑part transaction: you sell business assets (vehicles or MHE) to a funder and immediately lease them back under an agreed contract. The sale provides an immediate cash injection; the lease converts ownership into a rental cost spread over an agreed term. Leases are typically structured as either operating leases (rental focused) or finance leases (closer to loan financing) — each has different accounting and tax treatment.

UK Business Loans acts as an introducer: we don’t provide loans. We match your business with specialist lenders or brokers who understand vehicle and MHE sale‑and‑leaseback transactions. Get Quote Now.

Which logistics assets are suitable?

• HGVs and articulated trucks
• Vans and box vans
• Trailers (curtainsiders, reefers, flatbeds)
• Refrigerated units and temperature-controlled trailers
• Forklifts, reach trucks, telehandlers and other MHE
• Container-handling equipment and specialist trailers

Eligibility depends on age, condition, maintenance history, hours/mileage and market demand for resale. Most lenders prefer well‑maintained assets with full service records and clear title documentation.

How a sale‑and‑leaseback deal works — step by step

1. Initial enquiry & eligibility check — You provide asset details (make/model, year, mileage/hours, maintenance records). A funder or broker assesses likely value and whether the asset fits their appetite.
2. Valuation and offer — A formal valuation is carried out (sometimes onsite). The funder issues a purchase price or indicative cash release (often a percentage of market value).
3. Sales agreement and funds release — Legal sale documents transfer ownership to the funder. Once signed and checks complete, funds are paid to your business (timescale: often 1–4 weeks depending on paperwork).
4. Lease negotiation — Lease length, monthly rentals, maintenance/insurance responsibilities and end‑of‑term options are agreed. Leases for vehicles and MHE typically run 2–7 years.
5. Ongoing operations — You continue to use the asset under lease. The lease will set out maintenance, servicing and insurance requirements — breaching these can trigger penalties.
6. End of term — Options usually include: return the asset, extend the lease, or purchase for a pre‑agreed residual. Residual values are important commercial levers for pricing.

Key milestones: valuation → sale contract → funds transfer → lease commencement. UK Business Loans can connect you quickly to parties who manage these steps.

Typical commercial terms & key metrics

• Cash release (LTV): typically 50–80% of current market value depending on asset type, age and condition.
• Lease types: operating lease (off‑balance sheet rental style for some accounting frameworks) vs finance lease (more like a loan; may sit on balance sheet).
• Lease duration: commonly 2–7 years for vehicles and MHE.
• Monthly rentals: driven by purchase price, lease term, residual value and your credit profile.
• Residual value: the expected market value at lease end — higher residuals lower monthly rent but increase end‑of‑term risk.
• Other fees: documentation, end‑of‑term charges, early termination fees and maintenance charges may apply.

Pricing is influenced by asset age, mileage/hours, maintenance, market demand, and the borrower’s financial profile. Always compare multiple offers to ensure competitive rental rates and fair residuals.

Accounting, tax & VAT — UK considerations

Sale‑and‑leaseback transactions can have different accounting and tax consequences depending on lease structure and the applicable accounting standards (IFRS/UK GAAP). In summary:

• Finance leases are often treated like debt — assets and liabilities may remain on the balance sheet.
• Operating leases may be treated as rental expense — accounting treatment varies with standards and thresholds.
• VAT: VAT is normally due on the sale proceeds and on lease rentals. Recoverability of VAT on rentals depends on how the asset is used and the business’s VAT status. Refer to HMRC guidance for specifics.
• Corporation tax and cashflow: a one‑off cash inflow improves liquidity, but ongoing rental costs reduce taxable profits differently to depreciation and interest.

This is general information only — always consult your accountant or tax adviser for specific treatment relevant to your company.

Who benefits most — suitability checklist

• You need immediate cash to support growth, working capital or to meet covenants.
• You must continue using the assets operationally and cannot afford downtime.
• Your fleet or MHE has reasonable residual value and a good maintenance history.
• You want to improve liquidity without taking on additional headline debt on the company balance sheet (subject to lease accounting impact).

Not usually suitable for very old assets with little resale value or for businesses that insist on long‑term ownership without ongoing rental obligations.

Risks, pitfalls & how to avoid them

Common risks include:

• High lease costs or unfavourable residuals that increase total cost of ownership.
• Hidden maintenance or insurance obligations in lease contracts.
• Early termination penalties or restrictive usage covenants.
• Tax or accounting surprises if you treat the lease incorrectly.

How to mitigate:

• Obtain multiple competitive offers and compare total cost over the term.
• Have an accountant and solicitor review terms before signing.
• Clarify maintenance, insurance and return conditions up front.
• Use experienced brokers or lenders who specialise in logistics assets.

Alternatives to sale‑and‑leaseback

• Hire purchase — spread purchase cost and own at term end.
• Asset refinance / chattel mortgage — raise funds secured against assets.
• Commercial loans or asset finance — upfront lending to buy new assets.
• Invoice finance or working capital loans — if liquidity is the main issue and assets shouldn’t be sold.

Each option has trade‑offs: ownership, tax, balance sheet impact and monthly cost. Compare them before choosing.

Short case study (worked example)

A mid‑size haulier sells 5 vans and 3 forklifts with a combined market value of £120,000. A funder offers 75% LTV, paying £90,000 net. They lease the assets back on a 4‑year operating lease with monthly rentals of £2,000. Result: immediate cashflow boost of £90,000 to manage seasonal demand, while monthly outlay of £2,000 replaces depreciation and maintains operational continuity. End‑of‑term options include return, extension or purchase at pre‑agreed residuals.

How UK Business Loans helps

We specialise in connecting logistics businesses with lenders and brokers experienced in fleet and MHE sale‑and‑leaseback deals. Complete a short enquiry and we’ll match you to the best specialists who can provide tailored quotes. Our service is free to use and no obligation — we introduce you to lenders and brokers who will take the next steps.

For more information about tailored funding for transport and logistics businesses, see our sector page on logistics business loans. Ready to compare options? Get Started — Free Eligibility Check.

FAQs

Next steps & final CTA

If you’re ready to explore sale‑and‑leaseback options for vehicles or MHE, complete our short enquiry form. We’ll match you to lenders and brokers experienced in logistics asset finance and you’ll usually hear back quickly with no obligation. Get Quote Now — Free Eligibility Check.

Important information and trust

UK Business Loans is an introducer: we do not lend money or provide regulated financial advice. We connect businesses with lenders and brokers who may provide finance offers subject to their terms and checks. Terms, rates and fees vary by lender and business. This page is for information only and should not be construed as financial, tax or legal advice.

1. What is a sale-and-leaseback for logistics vehicles and how does it free up cash?
– A sale-and-leaseback lets you sell vans, HGVs or MHE to a specialist funder and immediately lease them back, converting asset value into working capital while keeping the assets in use.

2. Which logistics assets qualify for sale-and-leaseback in the UK?
– Commonly eligible assets include HGVs, vans, trailers, refrigerated units and forklifts, provided they are in good condition with service records and market resale value.

3. How much cash can I typically release from my fleet with a sale-and-leaseback?
– Most funders offer around 50–80% loan-to-value (LTV) of current market value depending on asset type, age, condition and lender appetite.

4. How long does a sale-and-leaseback deal take to complete?
– Many UK deals complete within 1–4 weeks from valuation and legal checks, though timescales vary by asset complexity and the lender’s process.

5. What is the difference between operating leases and finance leases for fleet asset finance?
– An operating lease is rental-style (often treated as an expense) while a finance lease resembles credit and may remain on the balance sheet, with differing tax and accounting consequences.

6. Will a sale-and-leaseback affect my company’s balance sheet or tax position?
– The accounting and tax impact depends on whether the lease is treated as an operating or finance lease under applicable standards, so consult your accountant for specifics.

7. How does VAT work on sale-and-leaseback transactions in the UK?
– VAT is generally chargeable on the sale proceeds and on lease rentals, but recoverability of VAT on rentals depends on your VAT status and asset use—check HMRC guidance or your accountant.

8. What alternatives are there to sale-and-leaseback for fleet and MHE financing?
– Alternatives include hire purchase, asset refinance/chattel mortgage, commercial loans or invoice/working capital finance, each with different ownership, cost and balance-sheet effects.

9. How quickly will I hear back if I use UK Business Loans to find sale-and-leaseback partners?
– UK Business Loans typically passes your enquiry to specialist brokers and lenders quickly, with many businesses receiving responses within hours or a few business days.

10. Does submitting an enquiry via UK Business Loans count as an application or affect my credit score?
– No — the enquiry is a free, non-binding match request and won’t affect your credit score, though individual lenders may perform credit checks later if you progress an application.