As the credit crisis gathers pace and crushes all aspects of society as we know it, its consequences are being felt far and wide at all levels of the social system.
Some of the ripples of the credit crunch are being felt in the auto finance sector, where people are trying to regulate their finances and possibly save some money at the same time. For some, the benefits of purchasing a personal contract prove to be the best financial option, either because of the flexibility it offers or simply because of the possibility of low monthly payments that people pay attention to.
Previous parts of this four-part symposium addressed the pros and cons of some of the popular auto loan options; personal contract purchase, installment purchase, and lease purchase (sometimes referred to as contract purchase). In this final part of the symposium, the discussion will focus on the lease, by taking note of its credentials and potential benefits, those who are still pondering which auto financing option is best for them will be able to make a conclusive informed decision. .
So what is the rental agreement? The rental contract has 2 main clauses; Firstly, you will never own the vehicle and secondly, the car is for your fixed-term use during a period that has been agreed upon by you and the rental company. With these two stipulations in mind, one can begin to fully appreciate the benefits of a rental agreement. If you are never going to own the car, how much would the benefits be? Typically, the term for the lease is capped at four years and in that time frame you don’t have to worry about the financial implications of the car for you or your company. The chance of a car experiencing damaging wear and tear in its early years is slim to none and this is one of the features that most businesses, large and small, are increasingly appreciating. By signing up to essentially “borrow” a product for a set term, you can take advantage of some of the tax benefits that come with non-ownership.
As long as your business is VAT registered, for tax purposes your car agreement with the rental company will be referred to as an “operating lease” and by doing so you emphasize that your business will not derive any financial benefit through ownership. The payments that are required to honor a lease usually start with a deposit. Based on the value of the car, monthly payments are calculated, following this calculation, a deposit in the region of 3 monthly payments is usually required.
With finances secured and the financial capabilities of the company established, the car is delivered and you can enjoy the safe vehicle knowing that for the rest of the term your vehicle will be fully serviced and maintained, and it’s not just about the components. but also damage caused by normal and general wear and tear, that of course if you have taken out a ‘full maintenance contract’. However, if you have chosen a no-maintenance agreement, your finance provider is under no obligation to keep up with vehicle maintenance; that would be up to you and your company if the car is in fact going to be used for business purposes. Most companies and individuals who choose leasing by contract as their preferred auto financing option are asked if the car’s mileage is likely to exceed 20,000 miles per year, since answering yes to the question should take the finance company to suggest that you go for “full maintenance”. contract. This is highly recommended for those looking to travel more than
20,000 miles per year. Clearly, if you do, having a roadworthy vehicle at all times is vital to you and/or your business and only a ‘full maintenance’ contract will give you the peace of mind and trouble-free driving you need.