A Complete Guide to Available Leasing Options

There are several options available for hiring a truck, such as contract rental, contract purchase, and finance leasing.

Rental by contract:

The rental agreement is a type of rental option that is long-term and can be used by business owners who want to rent a commercial vehicle in exchange for minimal monthly fees. This does not involve any monthly installment or risk related to depreciation. This is also devoid of disposal issues as the contract comes to completion.

In the case of a rental contract, it is the responsibility of the finance company to make the investment in the vehicle and suffer the consequences related to its depreciation. Besides that, the finance company also has to take care of the transfer of the vehicle at the end of the contract.

The length of the rental agreement depends on the finance company. The standard duration is two to five years. If the tenant company or individual wishes to take possession of the vehicle at the end of the lease, they must sign the deal in exchange for a credit check.

The rental agreement includes monthly rentals that are generally determined by the value of the vehicle. However, the residual value estimate depends on the duration and annual mileage of the vehicle offered in the contract. Monthly rentals do not include maintenance that is added to the total cost preferably.

VAT registered business companies are entitled to claim 100% clean VAT infused into vehicle financing if only the commercial vehicle or van is used solely for business purposes. In the case of a contract that includes the maintenance cost, the VAT is recoverable only on the service tax applied to the monthly installments.

Purchase by contract:

Contract purchase, on the other hand, is a financial arrangement that allows the leasing company or individual to own the commercial fleet without facing the risks related to the depreciation loss. Here, a business has to first select a new vehicle suitable for the business purpose and pay an initial deposit which must then be followed up with fixed monthly rentals. However, in the contract purchase, the monthly installments are VAT free. The company can acquire the vehicle at the end of the contract in exchange for a negotiable price.

Financial leasing:

Finance leasing is a form of leasing in which the owner of the vehicle is entitled to the finance company, while the vehicle is given for rent to a commercial company. This is the commercial and widely used way to rent a vehicle. This comes without the pressure of the large initial deposits.

Leave a Reply

Your email address will not be published. Required fields are marked *