The Various Forms Of Car Leasing To Pick From For Businesses ...

Businesses are offered a few different types of car lease. The first thing to do is understand the car lease. Depreciation is the largest part when you lease a car. This is the basis for the lease. The depreciation defines the amount of monthly payments. The amount the value of the vehicle is reduced over the lease period is the depreciation.

Here are some interesting facts about depreciation. The payments will be much more expensive if the car depreciates rapidly. This is good for the company that is the lessor. If a car depreciates slowly, the payments are much lower. This is beneficial for the business that is the lessee. An important aspect of depreciation is the condition of the economy. Depreciation also varies with the make, model, and year. A vehicle depreciates more rapidly at the beginning of its life. After that, it is usually steadier. Businesses primarily have open-end leases. In the case of an open-end lease, the business pays an additional fee if the vehicle depreciates more than anticipated. A closed-end lease means at lease end the customer can simply walk away. This is whether the vehicle has depreciated more or less than expected. Individuals are primarily offered this type of lease. It is an important consideration if a leasing company offers businesses a closed-end lease.

One type of lease offered to businesses is a business contract hire. This type of car leasing is very common. The length of this type of contract can be from 1 to 5 years. The contract details are designed to fit business needs. Contract hire leases are available with or without a maintenance agreement. There are several advantages to this contract. It does not appear on the balance sheet. It has fixed interest rates. A depreciation risk does not exist. 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 for this type of car leasing is less. Generally the monthly payments are also lower. Instead, the company may put these funds back into the business. One of the disadvantages comes at the end of the contract. A large balloon payment is incurred at the end of the contract. It is very important to ensure the business will have these funds available at that time. Payment due at lease end is the anticipated future value of the car. The vehicle then becomes the property of the lessee. The VAT can only be reclaimed if the vehicle was used only for business purposes.

An additional type of lease available is a finance lease. A finance lease is a tax efficient choice for businesses. Ownership of the vehicle is retained by the company that is the lessor. This type of lease does appear on the balance sheet. Generally, monthly payments and interest rates are fixed. The most important factor of car and leasing options is to completely understand what choices are available. The information will determine what the best choice for the business is. Another significant factor is full comprehension of the lease prior to signing it. Business can get into financial trouble otherwise. The purpose for leasing vehicles is to help the business grow.

Source: http://www.apolloarticledirectory.com/2011/07/the-various-forms-of-car-leasing-to-pick-from-for-businesses/

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