subject: Benefit Of Contract Hire On Vehicles Compared To Purchasing New Vehicle [print this page] Contract hire is the most popular method of leasing cars in the modern world and it is widely accepted. There are very many benefits that are associated with the choice of contract hire for the many business people.
To start with if you decide to go for the contract hire that will require you to make monthly payments you will have to benefit a lot. By making the monthly payments you will have access to a vehicle for any period or duration that you will find it suitable to you. The car hire costs have to take into account the price of the vehicles if it is hired. However, it is advisable to return the vehicle at the end of the expiry period and ensure that the vehicle is in good condition before you return it. It is also advisable that you should be able to discuss with your leasing company on any issues that is associated with the ownership of the vehicle. This will clearly show or who will be responsible for any servicing or maintenance of the vehicles.
Another benefit that is associated to contract hire for vehicles is that you will never encounter any risk. This is because as vehicles leaves the showroom their value is lost and since you are hiring a vehicle for a particular period then it means that the company will have to take the residual value. By choosing the contract hire of vehicles, you should know that you are protected from very many costs that include the maintenance and servicing costs.
The method of contract hire is very easy and cheap compared to buying. This is because in this method, you do not have to accumulate any capital so that you can be able to buy a vehicle that has a very high rate of depreciating. This gives you a very good chance to invest the money that you could have used to purchase a new vehicle. The money can also be used to reduce the debts of the business or be used to expand the business in very many ways.
Another benefit of contract hire is the fact that you can be able to reclaim the VAT up to 100 percent on the cost of the vehicle cost especially if it used for the purpose of doing business. But, on the other hand, the situation is different for those vehicles that are used privately. It is possible for a customer who takes a vehicle on lease and claim 50 percent of the VAT that is charged on the finance cost of that vehicle. It is also beneficial to a customer when the leasing companies that do provide the leasing services be able to reclaim the VAT and then they can be able to pass to the customer in the form that will give him a chance to pay reduced rental rates. This is possible because many companies are using it for the sole purpose of doing business.
Another benefit of contract hire is when reporting in the financial statements of the company that provides the services to the customers. The vehicles that are leased should not be shown on the balance sheet as this will give an exaggerated figure that will tend to improve the liquidity ratio of the company.
