Leasing is usually used mostly by all those businesses that require updating their fleet pretty frequently and those who would be interested in making the most of their money by getting a really better vehicle specification at far more affordable and reasonable monthly payments. Just like personal car leasing, you could arrange for a business car leasing without any upfront deposit relevant to used lease deals. However, a new lease deal would be requiring generally three, six or nine upfront monthly payments.
Business Car Leasing: An Overview
Business car leasing is extremely popular with businesses today thanks to the clear benefit of being relatively cheaper than purchasing a car outright. By keeping transport expenditure to a minimum, businesses could now allocate and divert their resources to some other core sectors of the business. Business car leasing is the best choice as it offers substantial tax benefits too.
Things to Consider While Choosing a Business Car Lease
While choosing the business car lease, you must keep a few factors in mind so that the lease is best suited to the specific requirements of your business. Here are some of the things that should be considered before entering into a lease contract.
- Initial deposit
- Duration of contract
- Repayment rates
- Mileage restrictions
- Balloon payments
- Excess mileage charges
- On or off balance sheet preference
Types of Business Car Lease Contracts
It is necessary to look around and assess accurately the relevant terms and conditions offered by various companies before you make your final choice. Here are some of the most popular and common types of business car leasing contracts. Visit LeaseQuit for short-term leases and effective lease quitting solutions.
Contract hire is actually an agreement that necessitates a customer to pay a fixed amount as a monthly installment for the stated or specified time period. This would also include an agreed mileage. The monthly installment amount is actually calculated by taking into consideration factors like vehicle cost, mileage, use period and even depreciation into account.
This kind of agreement is best for all kinds of businesses. Contracts are usually pretty flexible depending primarily on business requirements. Moreover, initial deposits are known to be low, VAT could actually be reclaimed, you could think of categorizing the lease as either off balance sheet or optional maintenance contracts. Additionally, businesses could counterbalance the monthly installments against the taxable profit.
Contract purchase is almost like contract hire, however, when the contract ends the business could purchase the car at the specified cost that had been agreed before the contract started. The business could also give back the car to the dealership alternatively.
Contract purchase proves to be ideal for all those businesses that wish to retain the car as an asset once the contract is over. However, businesses need to show the vehicle as basically an on balance sheet entry with this option.
Lease purchase is quite similar to contract purchase but here you have no option of returning the vehicle at the end or at any point of the lease contract. You have to make the ultimate balloon payment amount. This is certainly the best choice provided the business desires to retain the vehicle as an asset after the contract expires. Again with this type of a contract, the car would be shown as on balance sheet entry.
Finance leasing is regarded as a tax efficient choice where you could opt for paying the entire vehicle cost including all the interest charges during the lease period or you may choose to pay definitely lower monthly rentals and your ultimate payment would be based on the expected resale value of your car. The mileage is usually agreed, interest rates and monthly payments are also fixed during the contract term. When the lease term is over, you could carry on using the car but you cannot claim ownership of the car at any point.
You must be careful while choosing the kind of business car leasing so that it suits your precise business needs. Remember business car leasing is a much better option than purchasing the car outright.
This article is presented by Thomas Smith, he is a financial expert currently attached to a private firm. He has many years of experience in the finance world and also runs a blog where he posts solid advice on wealth management and debt mitigation, as well as, links to resources like LeaseQuit.