What Are The Various Forms Of Car Leases On Offer To Businesses ...

Car leases come in several different forms. Often a profitable and popular method of vehicle leasing available to businesses and individuals is contract hire. There is a regular monthly payment for the duration of the lease which can include maintenance and breakdown cover. Knowing this fixed amount assists a business/individual to budget accordingly. 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. The lack of a down payment upfront (up to 1/3 of the cars total worth) makes car leasing a very attractive option. A good way to pay for the car leasing is to offset the rentals against business profits. This usually allows for the VAT payments to be reclaimed.

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.

Interest payments and monthly repayments remain constant as long as the usage parameters for the vehicle leasing, established at the start of the lease, do not change. People should be cautious of finance leases due to the current economic climate, as the final balloon payment at the end of the contract may be more than the vehicle?s value. If you want to use the vehicle after the lease has ended it is possible to do so. You will be required to sign a peppercorn agreement which is paid to the financing company annually. During a peppercorn agreement you do not own the vehicle. If you choose not to use the car any longer it is sold off to a third party with you keeping any earned capital over the value of the car.

A contract purchase allows you to buy the vehicle at a set price determined at the end of the contract. 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. Contract purchase allows you the freedom to purchase the car if desired but also gives the freedom of allowing you to return it to the financing company.

A lease purchase agreement does not allow you to return the car at the end of the lease as it becomes yours. A single balloon payment is made at the end of the lease to cover the cost of the car.

Source: http://www.apolloarticledirectory.com/2011/05/what-are-the-various-forms-of-car-leases-on-offer-to-businesses-when-looking-to-lease-a-vehicle/

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