How Leasing Works
Leasing a car lets you avoid any unexpected costs by offering a fixed monthly payment for the term of the lease.
A lease is essentially a long-term rental agreement, offering exclusive use of a car or commercial vehicle for a set period at a fixed monthly price.
As a business, this is the most cost efficient method of funding the vehicles as it takes advantage of the tax and vat regulations to reduce the whole life running cost of your vehicles and is supported by the buying power of the finance company, to assist in reducing the cost even further.
The greatest cost of running any new vehicle is depreciation, and many new cars / commercial vehicles will lose more than half their initial value after the first three years of ownership.
Leasing a vehicle lets you avoid any unexpected costs by offering a fixed monthly payment for the term of the lease.
Unlike dealer finance or bank loans you only pay for the depreciation of the vehicle over the term rather than the full capital value.
Rather than pay large deposits you simply pay a small initial amount, usually equivalent to three monthly payments, at the start of the lease.
Then, at the end of the lease period (typically two or three years), you simply hand the car back. The job of selling the car and picking up the tab for depreciation is the responsibility of the lease company.
Benefits of Business Car Leasing
Minimum capital expenditure
Accurate monthly budgeting
Improved cash flow
Fixed interest rates
Rentals can be offset against the businesses profits.
Reduced administration
On-going advice and support
Road Fund Licence provided (vehicle excise duty paid) for duration of contract
Optional maintenance package
Optional breakdown rescue cover
Optional replacement vehicle cover in event of breakdown
Optional GAP insurance which provides cover for the shortfall between the outstanding finance and the insurance value if the vehicle is declared a write-off by your insurance company
Disadvantages
Early termination can be expensive
If you do more miles than stated in your contract you will be charged excess mileage for each mile over that stated in your contract
You must look after the vehicle and return it in a well maintained condition otherwise you will be charged for any damage over and above that stated in the ‘Fair Wear and Tear Guide’
You must have fully comprehensive vehicle insurance