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lease or buy?

the challengeLease or Buy

If you're new to the world of vehicle leasing, then this page may help you decide which route is right for you or your business. British people love to have something to show for their money.  For example, over 70% of people in the UK own their own home, compared with 40% in Germany and 50% in France. When you lease a vehicle on Contract Hire through your business, or on Personal Contract Hire, you take a vehicle on for a fixed period of time, and at the end of the term you simply hand it back. So, when we're talking to new potential customers about leasing, we often face the challenge about what clients have to show for their hard earned cash. .


so why lease?

Well, it often comes down to basic mathematics.  If you choose to own you're own home, you take a risk, but its a calculated one.  You're assuming that the value of your home will increase over time, and therefore owning your own home should be an investment.

When it comes to vehicles, unfortunately, the same rule does not apply.  In the vast majority of cases, cars and vans depreciate with the average car being worth just a third of its original value after 3 years.

example

Ford Mondeo 2.0 TDCi Zetec 140 5dr

Cash Price (New)

Value after 3 years

Depreciation

Equivilent Monthly Cost

Typical Lease Cost

£20,505

£7,800

£12,705

£352.92

£284.99 + VAT (£341.99 inc VAT)

So, when you lease, you are effectively spreading the depreciation cost over the time you have the car.  Most importantly, with a Contract Hire agreement you are also not taking any risk on its future value.

Advantages of Leasing

  • Cashflow - No need to tie up your cash in a depreciating asset
  • Low Initial Outlay - normally just 3 months in advance
  • Fixed Cost- Budget Accurately with fixed regular rentals
  • Flexible- With Contract Terms from 2 to 5 years and contract mileage allowance of up to 150,000 miles
  • Low Risk- No depreciation risk or hassle on disposal
  • Tax Efficient- 100% Tax Relief on a wide range of Contract Hire Vehicles
  • Hassle Free- Road Tax usually included for the Full Term, and Fixed Cost Vehicle Maintenance an option
  • FREE Complete Accident Assist with every lease
  • VAT Efficient- 100% VAT may be recovered on Commercial Vehicle Leasing and Fixed Cost Maintenance (50% VAT recoverable on car leasing finance payments)


Disadvantages of Leasing

  • The leasing company will retain ownership of the vehicle, so Contract Hire may not be suitable for your business if you are looking to own or buy a vehicle.
  • Contract Hire is a fixed-term lease agreement, and therefore if you might need to end the agreement early, you are likely to incur costs for Early Termination.
  • As vehicles are normally returned at the end of the agreement, you’ll need to consider how the vehicle is to be used, and whether it’s likely to suffer damage which is outside of normal fair wear & tear.  Leasing companies may charge for damage which falls outside of BVRLA Fair Wear & Tear standards.
  • If a vehicle is provided for “Private Use” through the business, then employees and Directors will be liable for “Benefit in Kind” tax.
  • Lease rentals are based on pre-determined mileage, which if exceeded will result in an excess mileage charge.  It’s sometimes possible to re-schedule an agreement part way through to take into account mileage variances.


worth considering...

 

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To find out more about how Concept Vehicle Leasing can help your business, please get in touch:
t.  0800 043 2050
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Our Awards & Accreditations

  • HSBC South London Business Award 2012 – Winner
  • London Business Awards 2014 – Highly Commended
  • Small Fleet Leasing Awards 2013 – Winner
  • BVRLA Leasing Broker Member Award
  • Small Fleet Leasing Federation