There are a few different types of car leasing offered to business. The first thing to do is understand the car lease. The largest part of the lease cars is depreciation. This is what the lease is based on. The depreciation defines the amount of monthly payments. Depreciation is the amount the value of the car decreases over the lease period.
There are some interesting facts about depreciation. If the car depreciates quickly, the payments will be much higher. 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 beneficial for the business that is the lessee. It is important to keep in mind that depreciation fluctuates with the economy. 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. Businesses usually use open-end leases. 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 not generally offered to businesses. If a leasing company does offer a closed-end lease to businesses, it should be looked into.
One type of lease offered to businesses is a business contract hire. This type of car leasing is very common. This type of contract lasts 12 to 60 months. The contract details are designed to fit business needs. 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. It has fixed interest rates. The depreciation risk is nonexistent. This is the responsibility of the leasing company.
A second type of lease is a lease purchase. A lease purchase has some strengths and weaknesses. The deposit on this type of car leasing is smaller. It also generally has lower monthly payments. Instead, the company may put these funds back 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 important to make sure the business will have this money available at that time. At lease end, the anticipated future value of the car is the payment due. The vehicle will then belong to the lessee. The VAT can only be reclaimed if the vehicle was used only for business purposes.
A third type of lease available is a finance lease. A tax efficient option for businesses is a finance lease. Ownership of the vehicle is retained by the company that is the lessor. The balance sheet does reflect this type of lease. The monthly payments and interest rates are usually fixed. The most important aspect of car and leasing choices is complete comprehension of the available options. Use this information to determine which is best for the business. Another significant factor is full comprehension of the lease prior to signing it. If not, the business can get into financial difficulty. The purpose for leasing vehicles is to help the business grow.
Source: http://used--cars.biz/used-cars/the-many-types-of-vehicle-lease-to-choose-from-for-businesses/
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