The Different Sorts Of Vehicle Leasing To Choose From For ...

There are a few different types of car leasing offered to business. The first thing to do is understand the car lease. Depreciation is the largest part when you lease a car. This is the basic premise for the lease. Monthly payments are determined by the depreciation. Depreciation is the amount the value of the car decreases over the lease period.

Depreciation involves some interesting facts. The payments will be much more expensive if the car depreciates rapidly. This is great for the company that is the lessor. The payments will be less for a car that does not depreciate quickly. This is good for the business that is the lessee. When the economy fluctuates, the depreciation of the vehicle will too. Depreciation also varies with the make, model, and year. The depreciation of a vehicle is more rapid in the beginning of its life. After that, it is usually steadier. Open-end leases are used primarily for businesses. An open-end lease means the business must pay another charge if the vehicle has depreciated more than expected. With a closed-end lease, the consumer can simply walk away at lease end. It does not matter if the vehicle has depreciated more or less than anticipated. This type of lease is usually offered to individuals only. If a leasing company does offer closed-end leases to businesses, this should be an important consideration.

Business contract hire is one type of lease businesses is offered. This type of car leasing is very common. This type of contract lasts 12 to 60 months. The details of this contract are designed to fit business needs. A maintenance agreement is optional with a contract hire lease. There are a few different benefits of this type of contract. This will not appear on the balance sheet. It usually has a fixed interest rate. A depreciation risk does not exist. This responsibility lies with the leasing company.

A second type of lease is a lease purchase. 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. Instead, the company can invest this money into the business. One of the disadvantages comes at the end of the contract. This is when a large balloon payment will be due. It is vital to the business that it makes certain this money will be available at that time. The anticipated future value of the car is the payment due at lease end. The vehicle then becomes the property of the lessee. The VAT can only be reclaimed if the vehicle was used only for business purposes.

A finance lease is another type of lease available. A finance lease is a tax effective option for businesses. The company that is the lessor retains ownership of the vehicle. This type of lease does appear on the balance sheet. The monthly payments and interest rates are usually fixed. The significant factor of car and leasing options is to fully understand the choices that are available. The information will determine what the best choice for the business is. A second important factor is to completely understand the lease before signing it. If not, the business can get into financial difficulty. The purpose of leasing vehicles is to move the business forward.

Source: http://davidmcsavage.com/the-different-sorts-of-vehicle-leasing-to-choose-from-for-companies

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