LED Lighting/Technology FAQ’S
What is finance leasing?
Finance leasing is effectively a rental agreement so that you can have equipment, in this case lighting, and use it over a period of time without having to make a large capital outlay up front. The lease agreement is a contract between you, ‘the customer’, and a leasing company – ‘CF Capital plc’. You make regular, fixed rental payments to the leasing company for a set period of time, which can help your cash flow. This means that you won’t have a depreciating asset on your books, and can benefit from the tax advantages available when paying a lease rental.
What kind of companies and organisations use finance leasing?
Virtually any company can arrange leases to obtain equipment, covering nearly every market sector – large or small. This includes sole traders, limited companies, plcs, local authorities, charities and the public sector. All can benefit from leasing, whether new start businesses or large established companies.
What products and services can I lease?
Many businesses already lease a lot of products and services. For instance, the most obvious is office machinery like photocopiers, franking machines or vending machines. Also, your business may already lease cars or other vehicles. But in short, the answer is almost anything including LED lighting equipment. It is an effective method of obtaining equipment, without having to make a large capital outlay that could seriously affect your business’s cash flow.
Should I purchase rather than lease?
If you are able to afford buying the equipment outright, this is another option for you. However, you should consider the following:
- Leasing allows you to free up your cash for other uses – perhaps new stock, advertising and promotion, staff training – plus unexpected expenses
- Payments are fixed throughout the lease period, making budgeting easier
- Lease payments are an allowable business expense, which means your profits can be reduced by 100% of the rental payment value, which reduces your corporation tax bill.
Wouldn’t it be better to get a bank loan?
Again, this is another option for your business. However, it is not financially prudent to have all your eggs in one basket. For example, if you used your overdraft facilities, you may not be able to react to any sudden and unexpected needs for short-term borrowing. If you arrange a loan, the interest rate may increase mid-way through. This can dramatically affect your cash flow. The bank may also require security for the loan. Alternatively, finance leasing offers fixed payments for the full term of the agreement and gives you the flexibility of using your banking and overdraft facilities for your day-to-day business needs.
Will my payments increase if interest rates rise?
No. Your monthly payments are fixed at the start of the lease and are therefore unaffected by fluctuations in interest rates. This means you can budget cash flow more accurately. If inflation rises, the cost of the equipment actually reduces in real terms, because your payments are fixed. Any changes to VAT will affect the VAT charged on the payments.
Do I own the equipment?
No. In a lease agreement you are actually renting the equipment for the period agreed at the beginning of the lease. CF Capital purchases the equipment and rent it to you. You also do not have any burden of ownership. ITAB Lighting provide a full parts and labour warranty throughout the lead period, up to 5 years (emergency lighting 1 year). So you will not have any of the maintenance costs normally associated with ownership.
Can I include the cost of installation?
Yes, if you would like to include installation costs as well, this can be arranged. Just let us know when a lease illustration is being prepared. You can arrange to use an installer of your own preference, or alternatively ITAB Lighting would be pleased to recommend an installer. Please discuss this with us at the preliminary stage.
Do I have to pay a deposit as part of the lease?
No. It is not normally necessary to make a deposit payment. However, you can pay a deposit if you prefer. This in turn will reduce the amount that has to be paid monthly. CF Capital will be able to discuss the options when applying for the lease. Once the agreement is signed, the equipment will be delivered (and installed if this is part of the agreement) and CF Capital will settle the full amount of the invoice with ITAB Lighting. Your lease payments will then commence and you immediately start to benefit from reduced energy costs, thanks to the new LED lighting.
Will the price for the light fittings increase if I choose finance leasing?
Absolutely not! The invoice price of the lighting is the same whether you decide to purchase outright from ITAB Lighting, or arrange a lease agreement via CF Capital. If you choose leasing, CF Capital will settle the invoice costs with ITAB Lighting. The overall cost of the lease payments will be higher than purchasing outright, but don’t forget that you will receive enhanced tax benefits and that you keep all the savings made in energy costs from day 1, without having to make a large capital outlay up front.
Will I receive any tax benefits associated with leasing?
Yes. Finance leasing is the most tax efficient way to acquire capital equipment. Lease payments are allowable business expenses and therefore attract 100% tax relief for the full duration of the agreement. Your profits can be reduced by the value of the rental payments, reducing your corporation tax bill. At the current rate, this means a 19% tax saving for most businesses that are making a profit. Please consult your accountant for exact details.
How do I make my payments?
CF Capital prefers payment via Direct Debit. This will be arranged prior to the lease starting. Payment is required on the same date each month. Quarterly invoice payments are also available.
Does my business have to be VAT registered to lease LED lighting?
No. A lease agreement can be arranged whether you are VAT registered or not. VAT is chargeable on every payment. If you are VAT registered, you can reclaim 100% of the VAT in your quarterly VAT return. If you aren’t VAT registered you will still benefit from leasing as the VAT will be spread over the rental payments rather than being required up front, if you purchased outright. This further enables you to utilise your capital more effectively within the business.
Can I claim the VAT back on my lease payments?
Yes. If you are VAT registered, you can reclaim up to 100% of the VAT back. VAT is reclaimed quarterly in your VAT return. If you become VAT registered during the lease contract you can begin to claim the VAT back from that date onwards.
Can I trust that the agreement is secure and I am protected?
Yes. CF Capital is one of the largest broking organisations in the UK. To date, they have arranged in excess of 300,000 leases and have strong relationships with the UK’s leading banks and financial institutions. They are fast becoming the leasing company of choice throughout the UK. CF Capital plc is fully authorised and regulated by the Financial Conduct Authority. This means that contractual safeguards are in place. We are happy to discuss this further with you.
What are LEDs?
LED stands for Light Emitting Diode. LEDs are semi-conductors, i.e. allow current to flow in one direction only. Each LED is made up of a piece of substrate material, normally industrial sapphire, of which half has been layered (or ‘doped’) with a material that has been positively charged and the other half negatively charged. This process is called epitaxy. When sufficient voltage is applied across the LED, current flows and electrons pass between the positive and negative halves of the LED, releasing energy in the form of photons, i.e. light. This is normally blue wavelength light, which is then converted to ‘white’ light as it passes through a layer of yellow phosphor material. Whilst this process is not 100% efficient, LEDs are significantly more efficient at producing light than any other artificial light source currently known to man.
Why should I consider changing my lighting to LED?
There has never been a better time to consider upgrading your lighting installation to LED from traditional light sources. This is because LED offers a number of significant advantages:
- Save Energy – LEDs are more efficient than any other known light source;
- Long Life – Rated useful life exceeds 50,000 hours, reducing maintenance costs as well;
- Reduce Carbon Emissions – LEDs contribute greatly in reducing your carbon footprint, because less energy is required to operate them;
- Affordable – Whilst professional LEDs are still a little more expensive than traditional sources, their price has dropped significantly in the last 2 years making them an extremely viable choice due to the full life costs, such as energy consumption and maintenance.
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How will LEDs save me money?
LEDs will save you money in two main ways:
- Reduced energy bills – LEDs are typically 40-60% more efficient than conventional light sources;
- Reduced maintenance costs – With a useful life of 50,000+ hours, lamp replacement and labour costs are almost entirely removed.
Are LEDs environmentally friendly?
Yes! LEDs offer a number of environmental benefits:
- Reduced Carbon Emissions – A large percentage of the UK’s energy comes from burning fossil fuels. As LEDs use significantly less energy, the amount of CO2 released is also greatly reduced;
- Reduced Waste – LEDs operate for over 50,000 hours. This is at least 10 times longer than halogen lamps and more than 2-3 times the life of fluorescent and metal halide. This reduces the amount of waste sent to energy intensive recycling or landfill;
- Environmentally Conscious – LEDs do not contain any harmful chemicals, toxic heavy metals, such as mercury, or rare earth metals. They also do not emit any UV radiation.
What is the rated life expectancy of LEDs?
This does vary, depending on the type of LED used. It can also be significantly reduced if cheap, low quality LEDs are used, or if the luminaire (light fitting) is not designed correctly. ITAB Lighting only use high quality LED chips sourced from reputable manufacturers. These have a rated useful life of 50,000+ hours of operation. This is maximised by ensuring that the luminaire is fitted with ENEC marked high quality electronic drivers (control gear), as over-running LEDs negatively affects life. LEDs are also highly susceptible to temperature. Even small increases can severely reduce life, so ITAB Lighting ensure that thermal management within the luminaire is designed to optimise LED life.
What is the difference between lm/W and llm/cW and which is most important?
Both lumens per watt (lm/W) and luminaire lumens per circuit watt (sometimes expressed as llm/cW or LL/cW) are measures of luminous efficacy, or lighting efficiency. Lumens per watt (lm/W) best refers to the efficacy of a light source – how much visible light you get for a given amount of electricity consumed. However, this is just for a bare light source and not a full and true measure of how efficient that light source is when placed in any given luminaire (light fitting).
The drivers (control gear) within luminaires will have circuit losses, such as heat and power factor. The total power consumed including these losses is called circuit watts. Likewise, the optical assembly of any luminaire can never be 100% efficient, with some light being internally reflected or absorbed by the luminaire materials. The amount of light that is emitted after these losses is called luminaire lumens. Luminaire lumens per circuit watt (llm/cW) is, therefore, the best way to compare the real efficacy of two or more luminaries. This gives a true comparison that also includes how well the luminaire has been optically designed and the quality of the drivers, in addition to the light source efficacy – i.e. it compares useful or delivered lumen efficacy.
Why is heat management important with LEDs?
Heat can affect many of the performance characteristics of LEDs. Light output of an LED will reduce as the junction temperature of the LED increases. Every luminaire range has been photometrically tested in a thermally stable state – i.e. the fitting has been turned on long enough to warm up and reach an equilibrium with the ambient air.
As the junction temperature in an LED increases, there is also a shift in the colour temperature of all LEDs. Using trusted, reputable manufacturers such as Philips, Tridonic and Samsung, we can ensure that this is kept to such a small degree as to be imperceptible.
Most critically, overheating can cause an irreparable reduction to the lifetime of an LED, so it is critical that this aspect of luminaire design is not overlooked. All ITAB Lighting luminaires are designed to optimise thermal management, employing the correct method and design of heat sink as appropriate to ensure LED life is extended as long as possible. This is backed up by thermal testing of each new luminaire range.
What is Ra and the colour rendering index (CRI)?
The colour rendering index or CRI is the current standard measure of a light source’s ability to render the colours of an object ‘realistically’ or ‘naturally’ compared with a known reference source, either incandescent lamps or daylight. The index consists of 14 standard colours.
The Ra value is the average of the first eight standard colours as a ratio, to provide a single value which is an approximation of the colour rendering quality of the light source. Values range between 1 – 100, with 100 being the best rendition. Current standards require that interior lighting for offices, retail, education and healthcare must achieve a minimum Ra80. Where colour matching is required such as in certain healthcare and retail applications, an Ra value in the high 90’s is usually required. LED luminaires manufactured by ITAB Lighting are >Ra80 a standard and a full range of options is available for installations requiring >Ra90.
What is R9 colour rendering and why is it important?
The current standard measurement of colour rendering (see FAQ on Ra and CRI)) takes an average of the first 8 standard colours out the total of 14. However, it does not take into account saturated colours, specifically R9 – red. This colour is very important if objects that are predominantly red are not going to look washed out.
Due to the fact that LEDs produce blue light, which is then passed through a phosphor layer to create a broader spectrum of white light, the R9 value can be low, whilst the CRI value can be high. This can therefore be misleading, because if LEDs have a low value for any of the colours R9 saturated red, R11 saturated green or R12 saturated blue, then installations can be left looking pale and washed out. High quality professional LEDs have improved in this regard and ITAB Lighting has luminaires available which have strong colour rendition throughout all 14 standard colours, ensuring accurate and high quality colour reproduction, which is particularly essential in retail and healthcare applications.
What is colour appearance, or colour temperature and why is it important?
Colour appearance is a method of describing the colour characteristics of a light source – that is the visual sensation of how warm or cool it appears. Choosing a light source of the correct colour appearance is important for creating the most suitable ambience in a lit interior, complementing the interior colour scheme. Colour appearance is expressed using the kelvin (K) temperature scale, so is often also described as colour temperature, or more correctly correlated colour temperature (CCT). CCT is based upon a comparison of the colour a light source appears, to that of a black body radiator when it is heated to the corresponding temperature in kelvin. Warmer colours are closer to the red colour spectrum and the cooler temperatures closer to the blue colour spectrum.
As a benchmark, traditional tungsten lamps have a CCT of 2700K, generalised as very warm white. Halogen lamps are typically 3000K, or warm white, whilst fluorescent lamps in the UK are normally 4000K – neutral or natural white. Cool white is normally considered to be 5000K or above and can create an unnaturally cold feel to interiors. There is no industry standard for the temperature at which each description start and stops – so some people refer to 4000K as cool white. LED luminaires manufactured by ITAB Lighting are normally supplied in 4000K colour appearance, with the standard option of 3000K for most products.
Can I dim LEDs?
Yes, LEDs can be dimmed. However, the luminaire (light fitting) must be fitted with the correct type of dimmable driver (control gear). Please tell us at survey and design stage if you wish to have LEDs that are dimmable.
Can I use lighting controls with LEDs?
Yes, in fact LEDs are the perfect light source as life is not adversely affected by multiple switching as are fluorescent and metal halide lamps. So occupancy control, using PIR or microwave sensors is perfect way to control LEDs. Likewise, LEDs can be easily dimmed, as long as the correct, high quality drivers (control gear) is fitted, so daylight response dimming is easily achieved. This will result in even greater energy savings and extended life. Either way, please advise ITAB Lighting at the survey and design stage so that we can ensure the correct specification of product.
Do you supply lighting controls?
Yes, ITAB Lighting can offer a full range of lighting controls to suit your requirements. Controls can be stand alone or integrated into the luminaires (light fittings). We can offer simple occupancy detection, daylight linking or maintained illuminance right though to fully addressable DALI control systems and/or scene setting. Please discuss your requirements at the survey and design stage.
Do you supply LED emergency lighting?
Yes, ITAB Lighting has a full range of LED emergency luminaires and exit signs, plus mains luminaires converted for emergency operation. LED is the perfect light source for emergency operation due to its reliable, long life characteristics. We would be delighted to discuss your emergency lighting requirements at the survey and design stage.
Is LED lighting safe?
Yes, LED is a very safe light source. LEDs do not produce any UV emissions, so are particularly suitable for use where materials would otherwise be faded, such as in retail or art gallery applications. LED is a very intense light source, so should not be viewed directly at close proximity by the naked eye, particularly high power versions. However, this is similar to advice provided for conventional high intensity discharge (metal halide/SON) and some halogen light sources. Most LEDs used for commercial lighting applications are mid or low power versions and are normally mounted behind a diffuser or lens, which in most cases eliminates this risk completely.