Choosing the wrong type of vehicle leasing can be disastrous. Before choosing a lease, be sure you have knowledge of all the car leasing options available. You will not want to look back on the experience with regret; you’ll want to be proud of your decision.
Now that you know you want to lease a car, do you know all of your options? Rising auto and financing costs have made leasing seem like a budget friendly option of car ownership. The reason costs are so much lower to lease is because you don’t actually own the car; in essence, you rent it. If you want a flashy new car every four years, vehicle leasing is your best friend.
Closed-end car leases tend to be the most popular type of car leasing options amongst consumers. Close-end leases make it easier for consumers to walk away at the end of agreement. After their lease is finished, consumers have no payments (unless they have violated terms). When the lease has consummated, the only way consumers will pay more is if they go over mileage or damage the vehicle. Get a good insurance plan when choosing this option, and make certain to keep up on maintenance.
Open-end Leases are usually utilized by commercial businesses, rather than consumers. The individual signing the lease is the one taking the financial risks. This plan offers more flexible mileage to commercial industries, as they typically require more mileage. An open-end lease is closed only after the lessee covers any disparity between the predicted resale value at the time of the lease signing and the actual value at the termination of the lease. If the market value of your car drops significantly, you could lose more money then you bargained for. Commercial leasers tend to pay more monthly but their risk is much lower than those who chose business leases. Business Leases have many similarities as a close-end lease and an open-end lease. Individuals who would like to utilize this leasing option are told to speak with financial advisors before making a decision. They know the risks and benefits involved and can give you their best advice. Fleet managers are next on the list to meet after you’ve sought the counsel of your advisors. You can find a fleet manager by selecting the car you want and contacting their dealership.
Consumers should be aware that close-end leases are likely the best options for them. There are very few risks and they occur with mileage mismanagement and negligence to the car. Don’t forget you need a good insurance policy and to monitor your mileage.
Business and industry will almost never be advised to purchase a car rather than lease, but an individual consumer who drives a lot of miles or tends to damage their vehicles might do better to purchase rather than lease. With all this in mind, the first step to getting the most from your automotive dollar is to be honest with yourself about your driving needs and habits.
Leasing a van or company vehicle seems to be popular at the moment with figures in van leasing recovering significantly in 2010. Leasing company vehicles is a shrewd decision when in the early stages of a new business venture. Businesses are particularly vulnerable in their early stages. Leasing company vehicles is a wise decision, all businesses should have some capital rather than lump sum you can sleep a little easier at night to work with and by paying flexible monthly installments. The subject of leasing is a mystery to many. Leasing is somewhat of a mystery.
Leasing a vehicle, it involves dealing through a finance group who own the model you’re after. The lease company creates a lease contract and terms of monthly payments to be paid. When the term expires the patron has the option of paying off the remaining costs and owning the vehicle outright. This is the aspect of Commercial Van Leasingwhich appeals to people the most.
Recession recovery has halted most businesses’s major acquisitions that were previously planned. Which is why leasing your company vehicles is a sensible financial step to take when starting your new venture. On the whole, leasing is a short term deal that can actually save you money. By typing in ‘Citroen van leasing‘ or ‘Vauxhall Vivaro‘into an internet search engine you will see an abundance of deals to choose from with most offering 100% tax benefits. Of course, you will only need to pay road tax for the duration of your contract. Servicing cost may also be included in your monthly payment which means maintaining your vehicle is easier and probably cheaper. It is possible to opt to buy the vehicle after after the lease expires after a year or two; or you could trade it in for another.
Small businesses changing company vehicles on a regular basis can save a significant amount of cash on vehicle leasing deals. New small businesses can be extremely vulnerable and owners often plough their entire savings into getting their new venture up and running. Vehicles bought for business purposes tend to be loan or hire purchase cars. Although, businesses that tend to trade in their vehicles after a period of four to five years would benefit more from leasing.
Leasing is ideal for a small business. Businesses are at their most vulnerable in their early stages of growth. So rather than fork out a lump sum for a vehicle why not pay flexible monthly instalments and keep that extra cash for a rainy day. For instance, a BMW 3 series can cost £140 a month less on a four year car leasing UK deal than to buy a Ford Mondeo using a loan at 9.9pc over the same period. Businesses can avoid paying VAT and receive a 50pc reduction on executive cars that are also used for personal journeys by choosing to lease.
The problem is that a majority of smaller businesses don’t have enough knowledge of leasing to make an informed decision. However, leasing may not be the answer for everyone. By taking up the option of buying the car at the end of the lease and owning it for something like a 10 year period then the best option would be to buy the vehicle in the first place; leasing is a favourable option for those looking to sell their car after a four or five year stint. Approximately 2 million cars are sold each year in the UK, with around a million bought by consumers, 800,000 by fleet operators and 200,000 by businesses. It’s important not to rush into any deal, you don’t want to be stuck with a vehicle which you don’t need or want for the duration of the lease. It’s also important to read the terms and conditions of the contract very carefully.
The £400m programme will mean motorists will be eligible for a 25 percent discount on the price of nine car models: the Vauxhall Ampera, the Chevrolet Volt, the Toyota Prius Plug-in, the Tata Vista EV, the Citroen CZero, the Mitsubishi i-MiEV, the Peugeot iON and the Smart fortwo electric drive.
The subsidy will translate to around 15,000 cars per year; industry experts are saying that it is unlikely to have a major impact on the British car fleet. The British car industry will surely now up their production rate for electrical cars; the UK industry has already won the competition to build the European version of the Nissan Leaf at the Japanese firm’s Sunderland factory. Many automakers relied on vehicle leasing or personal contract purchase to sell their electrical models or sold high-priced small roadsters in small numbers. But like Nissan’s Leaf, these models of cars will now become affordable.
However, only three of the nine cars are obtainable for the New Year with the other models not available until as late as 2012. The Peugeot, the Mitsubishi and the Smart will be obtainable for contract purchasewhen the plan takes its course in the New Year. Transportational grants will be given to the East of England, Greater Manchester, the Midlands, Scotland and Northern Ireland. The cash will pay for charging infrastructure to support electric cars. London, Milton Keynes and the North East have also been granted government funding and will also receive cash from a central fund worth a total of £20m.
Philip Hammond, Transport Secretary, said: “Government support for more affordable electric vehicles and more local re-charging points means we are on the brink of a green revolution. The year 2010 could be the year when the electric car saw a resurgence.” He added: “Anyone who’s filled up at a petrol station recently will realise that the ability to recharge overnight at 1-3 pence per kilometre is extremely attractive. The reason of supporting this technology is to boost its production.”
For many people, one of the greatest joys of going on holiday is taking charge of a brand new, state-of-the-art hire car and enjoying a week or two of hassle-free, pleasurable driving. One disappointment of returning home, as unconscious as it may be, is having to go back to using one’s older, less comfy car. Smart car users, however, have discovered a cost-effective way of bringing that luxury, care-free hire car experience into their everyday lives: contract hire car leasing.
Just like hiring a car, contract hire enables the driver to have direct access to one of the latest vehicles on the market, with no worries about having to pay the road fund licence, and the backing of a full manufacturer’s warranty. Contract hire, then again, actually improves on standard car hire in the following ways. Firstly, the contract hire customer is able to choose any make, model and colour of vehicle, as if he or she were purchasing a car direct from the manufacturer. Secondly, the contract hire customer is granted undivided use of this same vehicle for the entire length of the contract period (usually three years). Thirdly, the monthly rates for contract hire are very favourable, since they are, for the most part, derived from the value of the car’s depreciation over the contract hire period, rather than on its total sale price when new.
One reason why car leasing is so popular with many businesses, is that there is so much scope for accounting and taxation incentives. These benefits vary according to the type of lease chosen, with some types of lease having more than one of these benefits. One of the most widely recognised incentives of vehicle leasing, is a business’s ability to reclaim at least 50% of the VAT due on each monthly lease settlement. This is a benefit applicable for VAT-registered businesses, which take out either a contract hire or finance lease agreement.
A second incentive is a business’s ability to offset the leasing costs against corporation tax. For van leasing under a contract hire agreement, 100% of the monthly lease payment can be offset against corporation tax. For cars under the same contract hire agreement, the amount may be lower, depending on the emissions from the car. For those companies that prefer to keep their lease payments off the balance sheet (in order, for example, to reduce their official outgoings so that funds can be allocated to another area of the business), undertaking a contract hire agreement will provide the solution they seek. On the other hand, should a business feel it could profit from incorporating lease payments as an asset on its balance sheet (so as to attract finance, for example), a finance lease will be the answer.
A house and a car are often the two most high-priced domestic purchases a householder can make. Just as it is possible to rent a house with recurring payments, so too is it possible to have exclusive use of a car without buying it, a process known as car leasing. Moreover, whilst it is generally accepted as economically prudent to rent, rather than stretch oneself financially with mortgage commitments and expensive deposits, it makes even more economic sense to also choose car leasing over car purchase. There are two main reasons for this.
Firstly, car leasing costs are basically based on how much a vehicle depreciates over the term of the lease, rather than on its purchase price. Property rentals, however, strongly reflect the overall value of the property in question. Therefore, whilst some house rental payments can in some cases be as expensive as a monthly mortgage fee, car leasing costs are generally cheaper than those incurred by embarking on a monthly vehicle finance purchase plan.
Secondly, whilst renting a property will mean foregoing the benefits of owning what is likely to be an appreciating asset, there is little to be said in favour of owning a depreciating asset such as a car. Indeed, by limiting a car lease to three years, with no further commitments, a householder will profit from a full manufacturer’s warranty, whilst totally avoiding the vehicle’s long-term depreciation risks.
There are several ways in which thinking ‘outside the box’ can give additional advantages through vehicle leasing. One way in which some businesses and individuals view vehicle leasing, is as an opportunity to defer making up their mind on whether or not to purchase a vehicle. By taking out a contract purchase agreement, the lease customer reserves the right to purchase the vehicle at a pre-agreed price at the end of the car leasing contract hire period. However, if the lease customer decides not to purchase the vehicle, then it can be returned to the leasing company without any further obligation. This ‘best of both worlds’ option can also benefit the customer, should a successive sale of the vehicle bring in more money than the purchase price paid to the car leasing company.
A second way of taking a ‘left-field’ advantage of vehicle leasing, is to make good use of the capital saved on monthly lease payments over more expensive monthly purchase finance payments. These savings can, for example, be used towards a fund for increasing the down-payment on any follow-up lease. Since a higher down-payment will result in lower monthly lease payments, this saving cycle can continue even more effectively in preparation for the next follow-up lease. A third idea is to always select a vehicle that tends to keep its value better than others. The rate of depreciation on such a vehicle will be lower, which will in turn lower the customer’s month-to-month lease payments.
Starting a small business unsurprisingly means hard work and various responsibilities for the owners. Van leasing or other vehicle leasing, however, can mean that vehicle management is one fewer area to worry about. With vehicle leasing, monthly rates compare very favourably with purchase finance repayments. One of the upshots of this is that sourcing brand new state of the art vans or other vehicles becomes far more affordable. Indeed, since vehicle lease payments are often based largely on a vehicle’s rate of depreciation during the lease period, those high end vehicles that hold their value better will often work out rather cheaper than some more inferior models. With more reliable vehicles to hand, backed up by a full manufacturer’s warranty, business owners have far less to lose sleep about in terms of reliability. Some vehicle leasing companies will even offer free roadside assistance for at least part of the lease. Other customer care options, such as maintenance packages, can also be negotiated.
Certain types of lease can also mean that the worries of long-term depreciation and vehicle disposal are taken care of. With a contract hire car lease, for example, the leasing company will simply collect the car at the end of the lease period with no further commitment on the part of the business owner. The business is then free to continue leasing a similar, or different, new vehicle for a further two to four year lease period. For many drivers, the comfort of having paid off the finance on their vehicle is undermined by anxiety over their vehicle’s future reliability and potentially high maintenance bills. Many such drivers now say they are thinking of switching to car leasing.
Even those drivers who harbour romantic notions of keeping the same car going for years to come will be under no illusion that the reality of an older car can often equate to, among other problems, the need for major mechanical work, difficulties in sourcing older parts and components and even a more high-priced breakdown rescue agreement. Part of the reluctance to part with an older vehicle can be the dread of having to source the finance for a newer model, coupled with the fear that gambling on a second-hand car may leave the motorist worse off in terms of both cost and reliability. Car lease can provide an affordable and reliable long-term solution. A motorist can access a brand new car of their choice for a very tolerable monthly payment. Furthermore, a motorist’s existing vehicle can often be used in part exchange to help finance some of the lease costs. There may also be welcome extras such as free vehicle recovery assistance and a fully paid-up tax disc. With some car leasing agreements the motorist even has the opportunity of buying the car at the end of the lease period.
There are three major myths regarding vehicle leasing: that it is an ‘executive’ option, that it only permits access to powerful saloons, and that it is akin to the lavishness of luxury car hire. The first of these mistaken perceptions, that car leasing is only for business executives, is a distortion of the fact that certain businesses can secure taxation and VAT advantages from leasing. However, this does not mean that leasing companies are not interested in enticing private car drivers. On the contrary, leasing options, such as personal contract hire and personal contract purchase are only offered exclusively to private car drivers.
The second misconception, that only large gas guzzlers are available for leasing, probably stems from the fact that vehicle leasing does not incur the ‘benefit in kind’ taxation of company cars, and is therefore especially advantageous to those senior-level staff who opt for larger vehicles. A reputable leasing company will gladly source any make or model requested by a potential customer, regardless of the vehicle’s colour, size or style.
Lastly, car leasing is not the same as car hire. With car leasing, the customer enjoys exclusive access to the same vehicle during the entire lease period. Car leasing is also much cheaper than car hire, since rates are based on the depreciation value of the car over the lease period, rather than on its total value. There was a time, long ago, when smoking was considered good for your health. It is thought that car ownership will, one day, be similarly ridiculed as the province of the deluded mind.
Car ownership, far from something to boast about, actually demonstrates huge economic mismanagement and wastefulness. Once a new car leaves the dealer’s showroom, its value starts to plummet dramatically. By the end of the first year it will have lost, on average, about a third of its original value. Buying a second-hand car, on the other hand, not only traps the new owner in the car’s continuing downward spiral of depreciation, but also eats heavily into the owner’s finances, by way of extra maintenance and repair costs.
However, car leasing is increasingly seen as the smart, financially perceptive, method of securing a new, reliable vehicle. Monthly leasing costs, as part of a contract hire, are far lower than the equivalent monthly costs for vehicle purchase finance. This is because car leasing costs are based mainly on the depreciation value of the car, during the two to four year period of the lease agreement rather, than on its purchase price. Furthermore, at the end of the lease period, the driver can basically have the car collected by the lease company and switch to another new model, with no further expenses to pay.
We find ourselves in what is being called an ‘austerity economy’, the government is cutting public spending while increasing the amount of cash that is being drawn from the public in the form of taxes. And that’s a fine economic model, obviously cutting spending while increasing income is the very definition of getting richer so how can you apply this to your fleet?
If your company owns its own fleet then obviously they’re liable for maintenance, upgrades and replacements, fuel, insurance, taxes, everything. That’s a lot of spend to keep your employees on the road.
But you need to keep your sales reps, agents and staff on the road so that’s unavoidable, right?
Contract leasing allows you, as a company, partnership or sole trader to rent a car where your monthly premiums remain unchanged for the rental period. The drop in residual value is borne by the rental company and not by you. Because insurance and maintenance are all taken care of you have a predictable cost making budgeting simpler and time consuming factors such as reselling old cars, dealing with garages and workshops can all be avoided. This is as true for van contract hire as it is for car rental.
Car rental on the other hand is much like rental only for longer periods and that means better terms for you.
Leasing your fleet vehicles can mean that after the first year you should be able to get better terms on your monthly rental fees, the standard practice here in the UK is to request an initial payment to the value of the first three months followed by 35 standard monthly payments, for example. The mileage on these contracts is generally assumed to be 10,000mpa but you could be able to negotiate if your experience leads you to believe your vehicle usage will be different.
In recent years an increasing number of both individuals have decided to lease their vehiclers rather than buy them. People are finding that leasing will provide them with the transport that they need at a monthly cost which is more affordable than a comparable loan to purchase the vehicle that they want.
One of the negative aspects of leasing is that you are required to sign up to an agreed lease period and this is what determines your monthly repayments. Typical lease periods vary from around 2 to 4 years. But what can you do if, during that period, you need to change your vehicle for some reason? Maybe you can’t maintain the monthly payments or the model is no longer suitable for your needs.
Under these circumstances a lease swap maybe just what you need. Many suppliers who provide lease cars and vans offer their own lease swap programs, but there are also a number of businesses dedicated to lease exchange.
In a lease swap arrangement you don’t generally swap one lease for another one. Your existing vehicle lease will need to be transfered to someone else. It is worth noting that not all vehicle lease contracts actually allow transfer, so pay attention to your contract small print.
One way that you may choose to swap your current vehicle lease is to sign up to one of the online services offering this facility. If you are the person who wants to exchange their lease then you would be considered a seller and anyone interested in taking on your lease would be considered a buyer. Buyers benefit through not being required to provide an upfront payment because this has already been paid by the current lease-holder.
Companies that specialise in lease swapping and exchange usually charge a fee for their service. You will also probably encounter a charge from the leasing company for processing the lease transfer. You should also not overlook the need for gap insurance , essential when leasing a vehicle.
I recently used a lease swap web site to get a short term Fiat lease that has saved me an absolute fortune.
