Sunday, January 16, 2011

Contract hire For Sme's - An Excessive Luxury Or Plain Common Sense?

By Alan Thompson


Vehicle leasing is usually perceived as a luxury for those companies that 'can afford it'. This image may be very deceptive, however, as vehicle leasing is usually designed as a method of saving money.

• Firstly, the monthly payments on a car lease will usually be far less than those required via finance to buy the vehicle. This is because lease payments will largely reflect the anticipated depreciation of the automobile in the course of the lease interval rather than its original purchase price. Even if a business were to go for a second-hand automobile, the likely increase in upkeep and garaging prices, along with MOT charges (to not point out the incalculable loss of enterprise should a vehicle break down), can still make leasing a brand new car seem a far more inviting proposition.

• Secondly, some varieties of car leasing payments could be offset in opposition to taxable profits, whilst VAT-registered companies can often claim back VAT.

• Thirdly, although some leasing schemes require the automobile to be handed back at the end of the contract interval this may sometimes be a blessing to many businesses. There is no threat of being saddled with a depreciating asset that's tough to dispose of.

On the other hand, some car leasing options that let the acquisition of the vehicle after the lease contract has expired could be to a businesses' benefit if the purchase price, predetermined on the outset of the arrangement, turns out to be lower than the actual resale value. For some companies reliant on specialist vans, such as those with refrigerated sections or those with extra long compartments (designed to hold items such as carpets), van leasing has proven to be an advantage.

Specialist vans will be very expensive to buy new. However, attempts to find specialist models on the second-hand market will be fraught with difficulty. There's also the danger that poorer reliability will put deliveries at risk, a particularly thorny issue with time-sensitive items such as food.

Van leasing however will, firstly, take the headache out of tracking down the most appropriate vehicle. A great vehicle leasing firm can have a powerful relationship with many main manufacturers and dealers and there shouldn't be any restriction on discovering the suitable vehicle. This may even extend to be able to choose a preferred color from the manufacturer's full range. Additionally, though the leasing firm will have the ability to present a business with brand new, top quality vans, there will usually be far less capital outlay required than if the van were to be purchased. This is because monthly van leasing payments are based mostly on the anticipated depreciation of the automobile in the course of the contract period rather than on the automobile's complete original value. Though the van will not be owned by the business throughout the period of the lease, it can nonetheless enjoy sole access to this vehicle.




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