The Different Types Of Vehicle Leasing To Pick From For Companies

Businesses have different types of vehicle leasing available to them. Understanding a car lease is the first step. The biggest part of a lease car is depreciation. This is what the lease is based on. The depreciation defines the amount of monthly payments. The amount the value of the car decreases during the lease period is the depreciation.

There are some interesting facts about depreciation. The payments will be much higher if the vehicle depreciates quickly. This is good for the company that is the lessor. A car that does not depreciate quickly will have less expensive payments. This is good for the business that is the lessee. It is important to keep in mind that depreciation fluctuates with the economy. Other depreciation variables are the make, model, and year. The depreciation of a vehicle is more rapid in the beginning of its life. It is generally more even after that. Businesses primarily have open-end leases. In the case of an open-end lease, the business pays an additional fee if the vehicle depreciates more than anticipated. A customer can simply walk away at lease end with a closed-end lease. It does not matter if the vehicle has depreciated more or less than anticipated. This type of lease is not generally offered to businesses. It is an important consideration if a leasing company offers businesses a closed-end lease.

Business contract hire is a type of lease offered to businesses. This type of car leasing is very common. This type of contract lasts 12 to 60 months. The business needs are considered in the details of this contract. Contract hire leases are available with or without a maintenance agreement. There are a few different benefits of this type of contract. It is not on the balance sheet. The interest rates are fixed. The depreciation risk is nonexistent. This responsibility lies with the leasing company.

A lease purchase is another type of lease. A lease purchase has some strengths and weaknesses. The deposit for this type of car leasing is less. Also, the monthly payments are usually less. The company can invest the money into the business instead. A disadvantage comes at the end of this type of contract. This is when a large balloon payment will be due. It is very important to ensure the business will have these funds available at that time. At lease end, the anticipated future value of the car is the payment due. The lessee will then be the owner of the vehicle. If the vehicle is used for business purposes only, it may reclaim the VAT.

An additional type of lease available is a finance lease. A finance lease is a tax effective option for businesses. The vehicle remains the property of the company that is the lessor. The balance sheet does reflect this type of lease. Generally, monthly payments and interest rates are fixed. The most important factor of car and leasing options is to completely understand what choices are available. The information will determine what the best choice for the business is. Another significant factor is full comprehension of the lease prior to signing it. Business can get into financial trouble otherwise. The purpose of leasing vehicles is to move the business forward.

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