The Risks Associated With Car Contract Hire
When leasing or hiring a contract car, the associated risk is taken on completely by the car leasing company, who will charge you a fixed rate for the duration of the contract, despite the condition of the vehicle or what it may be worth at the end of the term. At times residual values of cars have been hit very hard and when this happens it is the finance company that suffers the loss, not the hirer.
In terms of risk, it is much greater when a company chooses a bank overdraft over a leasing agreement and opts to purchase all their vehicles outright. Whereas a bank can demand repayment at any point, a lease arrangement leaves the company in a more secure position, as they can be comfortable in the knowledge that their arrangement will not suddently be terminated. If the years 2008 and 2009 have taught car leasing companies anything it’s that banks are perhaps not the safest institutions with which to organise finance agreeements.
There are additional costs to consider also; the vehicle needs to be sold and this will require a member of staff to prepare, photography, list and show the car for prospective customers. Audi and BMW contract hirecan be sold on relatively easily second hand, but many models (from other manufacturers) can depreciate quickly and become very difficult to sell. Sometimes companies have taken delivery of the new car and they are still struggling to sell the old vehicle.
More recently, companies are starting to realise that the least time consuming and most secure form of vehicle finance is when you have fully budgeted motoring costs and you can just hand the vehicle back at the end of the term,; which is only available with contract hire.
Tags: automobiles, car leasing, cars, contract hire