What Is Car Lease?
Car lease is very simply where you lease a car or cars rather than purchase.
The normal lease terms offered are from 24-60 months.
Rates will vary depending on the vehicle chosen, the lease duration required, the annual mileage and the type of finance package.
Types of Car Lease Finance Options Available
Personal Contract Purchase
What Is Personal Contract Purchase?
Personal Contract Purchase is similar to Personal Contract Hire and is suitable for private motorists who want to benefit from corporate discounts as well as those who receive a car allowance from their employee to source their own vehicle.
With Personal Contract Purchase the leasor pays a fixed monthly rental for the span of the lease period and has an optional guaranteed future value (balloon payment) agreed at the outset should they wish to purchase at the end of the lease period.
Some companies are now looking at Employee Car Ownership (ECO) schemes as a viable alternative to regular funding methods. These schemes provide a mechanism for the driver to take personal ownership of their vehicle yet benefit from group buying power and tax efficiencies.
How Does Personal Contract Purchase Work?
The car is financed through a Credit Sale Agreement between the driver and leasing company. The employer pays the driver a monthly allowance which relates to the employee level and their choice of car. Taking this allowance together with the personal tax savings, as well as utilising Inland Revenue approved business mileage allowances, provides the driver with a net monthly budget.
Personal Contract Hire
Personal Contract Hire is a great way to drive a brand new veicle every few years for private motorists as well as those employed and offered a company car allowance from their employer.
Personal motorists benefit from corporate discount even though they only require normally one or two family vehicles.
Some companies are now looking at Employee Car Ownership (ECO) schemes as a viable alternative to regular funding methods. These schemes provide a mechanism for the driver to take personal ownership of their vehicle yet benefit from group buying power and tax efficiencies.
How Does Personal Contract Hire Work?
The car is financed through a Credit Sale Agreement between the driver and leasing company. The employer pays the driver a monthly allowance which relates to the employee level and their choice of car. Taking this allowance together with the personal tax savings, as well as utilising Inland Revenue approved business mileage allowances, provides the driver with a net monthly budget.
The driver has greater choice as they can trade up or down from their current company car level and pay more or less per month as appropriate. The employer can benefit from a reduction in the gross cost of providing drivers with a vehicle. However this is strongly influenced by the make up of the fleet and in particular the number of business miles conducted by a driver. Generally speaking, drivers need to be in the 10,000+ business miles bracket for this to be an effective choice. Personal contract hire works in exactly the same way as contract hire but with the VAT included and is only available to Personal induviduals.
Business Contract Hire
Under Contract Hire, vehicles continue to be owned by the leasing company yet are hired to you for a set period of time and at a fixed monthly rate. This method of finance can be useful for companies wanting to free up credit lines or improve cash flow by implementing fixed cost fleet operation.
How Does Contract Hire Work?
The monthly rental charged is calculated based upon the cost of the vehicle, the contract period and the anticipated resale value. It is also takes into consideration the predicted mileage, service and maintenance costs, together with any additional services such as relief vehicles.
Under a Contract Hire agreement the funder retains ownership of the vehicle at all times and therefore continues to absorb the subsequent risks such as unforeseen running costs and uncertain resale values.
Finance Lease is essentially another way of purchasing a car. Car lease finance does not include a maintenance contract, and when the lease period is finished the lessee becomes the owner. The advantage to getting car lease finance is that you can get tax advantages over those who are simply buying their cars.
Finance Lease
What Is 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.
How Does Finance Lease Work?
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.
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