Businesses are offered a few different types of car lease. The first thing to do is understand the car lease. The biggest part of a lease car is depreciation. This is what the lease is based on. Monthly payments are determined by the depreciation. The amount the value of the vehicle is reduced over the lease period is the depreciation.
Depreciation involves some interesting facts. The payments will be much more expensive if the car depreciates rapidly. This is good 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. An important aspect of depreciation is the condition of the economy. Other depreciation variables are the make, model, and year. Another factor is that depreciation is generally more rapid at the beginning of the car?s life. After that, it is usually steadier. Businesses primarily have 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 closed-end leases to businesses, this should be an important consideration.
Business contract hire is one type of lease businesses is offered. This is a very common type of car leasing. 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 a few different benefits of this type of contract. This will not appear on the balance sheet. The interest rates are fixed. There is no depreciation risk. This is the responsibility of the leasing company.
Another type of lease is a lease purchase. A lease purchase has some advantages and disadvantages. The deposit for this type of car leasing is less. Also, the monthly payments are usually less. Instead, the company can invest this money into the business. A disadvantage comes at the end of this type of contract. A large balloon payment is due at the end of the contract. It is very important to ensure the business will have these funds available at that time. At lease end, the anticipated future value of the car is the payment due. The lessee will then be the owner of the vehicle. Businesses may reclaim the VAT, if the vehicle was used for business purposes only.
An additional type of lease available is a finance lease. A finance lease is a tax effective option for businesses. The company that is the lessor retains ownership of the vehicle. The balance sheet does reflect this type of lease. Interest rates and monthly payments are generally fixed. The significant factor of car and leasing options is to fully understand the choices that are available. This comprehension can be used to decide what is best for the business. Another significant factor is full comprehension of the lease prior to signing it. Otherwise, the business can get into financial trouble. The purpose of leasing vehicles is to move the business forward.
Source: http://formula1game.info/the-many-types-of-car-leasing-offered-to-businesses.html
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