What Are The Various Options Of Car Leasing Available To Businesses When Buying A Vehicle. [article from Articleranks]

What Are The Various Options Of Car Leasing Available To Businesses When Buying A Vehicle.

Car leases come in several different forms. Contract hire is a popular car leasing option for both individuals and businesses who wish to do vehicle leasing. The vehicle is paid for by a fixed monthly payment. The option to include breakdown cover and car maintenance in this payment is often included. Having a fixed amount allows both individuals and businesses to calculate the costs well in advance. After the duration of the contract the car is returned to the lease cars company. This does not provide the option to buy the car but protects the individual from any incurring debt. Another benefit of car leasing is that there is no down payment on the leased car. This means businesses and individuals are not required to go into debt to afford a car or incur heavy interest rates from unpaid loans. It is possible to offset rentals against business profits. Often a percentage of VAT payments can be reclaimed. A road tax licence will be provided for the duration of the contract.

A finance lease is a type of business car lease where the financing company will buy the vehicle on behalf of a business customer. This loan is then repaid to the financing company in fixed monthly instalments. The vehicle will appear on the balance sheet as an asset even though its ownership resides with the finance company. Two payment options are available, firstly it is possible to pay the leasing contract in monthly instalments which are calculated with interest, alternatively you can repay the lease in smaller instalments with a lump sum paid at the end of the lease.

The usage parameters for the vehicle leasing are established at the start of the contract and as long as they do not change interest rates and monthly payments do not alter. Finance leases need to be entered with caution due to the current economic climate especially when choosing to pay the interest at the end of leased contract. This is because the balloon payment may be more than the cars current value. The vehicle can be used after the lease if a 'peppercorn' agreement is entered into. This requires an amount being invoiced and paid annually in advance to the financing company. The car can be then sold off to a third party with the finance company taking a percentage of the sale and the rest of the proceeds are kept by the client.

Contract purchase is similar to contract hire but allows the option for a vehicle to be purchased at the end of a contract for a pre-agreed price. Fixed monthly payments are made, which take into consideration the car's cost, anticipated mileage and depreciation, and other maintenance and service options the client may choose to include. Once the contract ends, the client can obtain ownership of the vehicle by making a final balloon payment, or the vehicle can be returned to the finance company and no further payments are needed.

In a lease purchase agreement you pay off the value of the car during the leasing contract with no option to return the car. You pay off the car in monthly rentals with a single balloon payment made at the end of the lease.

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