Saturday, May 28, 2011

Which Car Leasing Option to Choose?

 By Anthony Warner

There are many car leasing options you can come across and it is sometimes difficult to choose the right one. You must do enough research to find out which car leasing option suits your kind of work, business or personal circumstances.
Contract Hire
Contract hire, contract purchase, leaseback and finance lease are the main types of car leasing options available. Contract hire is a kind of long term rental arrangement which can be opted for by business people and personal users. This kind of car leasing is suited best for those who prefer to pay small payments initially every month, there is no risk of depreciation or the problem of disposing of the
car, for the user.
It is the finance company which provides the contract hire service, it buys the car, takes on the risk of any possible depreciation or loss and takes the responsibility of disposing of the vehicle at the end of the term of the contract. The contract is between 2 and 5 years, and the customer has to take a credit check. So you must be reasonably confident that your credit file is up to scratch. Every customer can have a tailor made contract to suit his individual needs and VAT registered business can claim half the VAT charges. Vehicles for pure business use can claim all the VAT charges. Monthly rentals can also be offset with profits which are taxable.
Contract Purchase
Contract purchase is a form of car leasing opted for by businesses or organizations. They hire expensive cars and wish to be given the choice of either handing over the car at the end of the term of the contract, or to buy the car at the end of the period. This kind of contract does away with the risk of any depreciation. Here, an initial payment is made and is followed up by monthly installments. In this form of car leasing, the car is shown as an asset in the account books of the business. At the end of the term of contract, the business can buy the car with a balloon amount and claim ownership of the car, or it can return the car and go in for a new contract for another car.
Leaseback is a form of car leasing and is used by businesses. Companies which wish to free the capital generated from the sale of the vehicle at market value to a finance company, generally go in for this kind of contract. The finance company then leases back the same vehicle to the company which sells it, and this is done with VAT in mind. This time round, the contract option is the contract hire kind.
Finance Lease
Finance lease is a kind of commercial leasing and is made use of by companies which lease out a vehicle for a fixed time period, from a finance company that owns the car. The client has to pay monthly installments with interest and this covers the costs. When a finance lease is taken, the company which goes in for the contract, has to pay for the cost of insurance, taxes and services. Finance leases can be conditional sales, or a kind of hire purchase. Depreciation and resale risks may be borne by the customer. All this should be checked before deciding on the right alternative for yourself or your company.

No comments:

Post a Comment


Related Posts Plugin for WordPress, Blogger...

Recent Post

free counters