To lease or to buy a car, that is the question!
The purchase of a car is secondary only to buying a house, the main difference with the two is the value of a car depreciates where as in general the value of a property increases. So why when there are more finance options than ever available are people still choosing to buy?
Whether it be for a business or personal use, car purchase is expensive and can be a drain on finances. This is where car leasing comes into its own.
To the uneducated, the option of car leasing can be daunting, but when simplified, the advantages of choosing a lease scheme become apparent. There are many types of car leasing finance options, they include:
Contract Hire, Personal Contract Hire, Contract Purchase, Personal Contract Purchase, Finance Lease and Lease Purchase.
Each has its merits and is dependant on the circumstance of an individual.
Car Contract Hire - This is the solution for companies who want to concentrate on their core business activities, while avoiding the financial risk and administrative burden of owning their vehicle fleet. Key features and benefits of Contract Hire include:
- Fixed rentals for the whole package, making budget planning easier
- Flexible terms to meet your requirements with variable duration and mileage terms
- Maintenance of vehicles can be included in monthly rentals, and so spread the cost
Contract hire removes depreciating assets from the balance sheet and the associated risks of owning vehicles - Flexible invoice arrangements help to considerably reduce administration
Personal Contract Hire - This is the solution for private individuals and is becoming more popular amongst car users. Key features and benefits include:
- Fixed rentals for the whole package, making budget planning easier
- Flexible terms to meet your requirements with variable duration and mileage terms
- Maintenance of vehicles can be included in monthly rentals, and so spread the cost
Contract Purchase - Companies who want to own their vehicles, but want to avoid the risk of depreciating assets, prefer this option. Key features and benefits include:
- Similar benefits to contract hire regarding fixed payments and flexible terms
- Maintenance and added value services can be included
- The finance company guarantees the resale value of the vehicle at the end of the contract purchase agreement for a known, fixed amount
- Ownership passes to the customer at the end of the agreement when all payments have been made
Personal Contract Purchase - This is a conditional sale agreement which allows you the option to purchase the vehicle, or to simply hand it back at the end of the contract period.
You can elect to include the same comprehensive service, maintenance and repair options as are available through Contract Purchase. Finance payments are not subject to VAT. If the optional service package is taken, VAT is payable on the service costs.
Finance Lease - Finance Lease is a tax efficient option where you choose to pay either the entire cost of the vehicle, including interest charges, over an agreed lease period or opt to pay lower monthly rentals with a final payment based on the anticipated resale value of the vehicle.
At the commencement of the contract, usage parameters for the vehicle are agreed, and assuming this does not vary, monthly payments and interest rates are fixed for the duration of the contract. Therefore you benefit though fixed costs but do take on the administration and operating risks. At the conclusion of the contract you can continue to operate the vehicle under a "peppercorn agreement" although you will at no time take ownership of the asset.
Lease Purchase - Lease Purchase is an agreement designed to offer dedicated vehicle funding where the customer wishes to purchase the vehicle. It is purely a finance package, and does not include maintenance or other added-value services (such as are available through Contract Purchase).
The customer is liable for the full value of the vehicle and has no option to return it at the end of the agreement. Monthly payments are not subject to VAT. The vehicle is registered in the name of the customer, and where this is a company, the vehicle will appear on the balance sheet, and Writing Down allowance will be available.
If you are looking into a new vehicle, and are worried about how to finance the purchase a car lease finance option could well work for you.
© Nationwide Vehicle Contracts - Car leasing.
