subject: A Novice's Guide To Van Leasing For Business - We Outline The Benefits [print this page] When choosing a car leasing company, there are some particular traps to beware of.
Various leasing companies may promise cheap monthly payments, only for the customer to discover that they are tied into an excessively long lease period. One benefit of leasing a brand new vehicle is protection by the manufacturer's warranty. A lease period that extends much beyond the life of the standard warranty period starts to lose its lustre.
In the same way, some deals with cheap lease payments and the promise of eventual vehicle ownership for a business customer, may well have a 'hidden' large payment at the end of the lease period built in to the system. The full details of any lease agreement should be made available well before the customer signs the lease contract. There are some vehicle leasing contracts that are enormously vague regarding the condition in which the vehicle should be kept, so as to avoid any penalties. In some cases the precise nature of these financial penalties will also be unclear. The lease customer should always have the details of any penalty clauses on exceeding mileage and wear and tear made completely transparent.
A lease company may try and force the customer to choose a precise vehicle make or model. One of the key incentives of vehicle leasing, however, should be its ability to allow the customer to choose the precise make and model of his or her choice. Many businesses are finding that pressures on their cash flow can be greatly eased by ditching van purchasing in favour of van leasing. Van leasing gives a business the exclusive rights to its choice of brand new vans for a modest monthly lease fee. This monthly cost is largely based on the vans' depreciation during the two to four year lease period. In view of the fact that the depreciation over that period is a lot less than the purchase price, leasing works out far cheaper than purchase finance payments over the same timescale.
Monthly payments can be made even smaller through a deferred purchase type of van leasing called lease purchase. Under lease purchase, monthly payments are kept artificially low in return for the business agreeing to make a final inflated 'balloon' payment at the end of the lease period. It is worth understanding that because the vans leased are brand new and under manufacturers' warranties, maintenance costs are also reduced with van leasing. To help matters further, with contract hire (whereby the van is returned at the end of the lease), the road fund licence is usually included.
Some contract hire critics contend that if the vans are purchased and kept going for a long period, then the initial high purchase costs would eventually even themselves out over the years. The problem is that nobody can predict how the vans will fare in the long-term. More importantly, a business with cash flow pressures needs funds now, not in a few years.
