The simple answer is that it depends on your circumstances. You may want the best value in the long term; or you want a car for the smallest monthly payments you can afford; or you want to change your car at regular intervals.
With leasing you can change your car regularly – typically every three years – and avoid the costs that come with driving an older vehicle. However, you will never own the car and you will always make monthly payments while your agreement is in place.
In the short term, leasing is cheaper than buying with a loan, in the medium term the two methods are about the same, and in the long term it is cheaper to buy.
A simple yet effective solution- you agree to take control of a car for a fixed period- the leasing company retains ownership, it’s yours to drive but it is never actually yours to own.
Contract hire offers fixed-cost motoring- you set the contract and the mileage.
All the risks of depreciation are taken away, and you can renew your vehicle every 24-48 months depending on your contract.
VAT is payable on rentals but is partially reclaimable by VAT-registered companies.
Ideal for Limited Companies, PLC’s, Sole Traders and Partnerships who are VAT-registered and want to have their car shown as an asset on the balance sheet.
Finance lease is more preferred by high mileage drivers where contract hire may not be suitable.
The hirer can choose to pay the entire cost over an agreed lease period, plus an interest charge (full payout lease), or pay a lower monthly rental and have a ‘balloon’ payment to pay at the end of the contract, based on an anticipated resale value of the vehicle.
PLEASE NOTE: With ‘full payout lease’ there is no final balloon payment, so takes away the risk of a shortfall at the end of the contract
Lease Purchase is an agreement where ownership of the car is transferred to the customer at end of the contract, subject to all terms and conditions being met. Monthly instalments are calculated taking into consideration the cost of the car, initial rental amount, length of contract, and the final balloon payment.
Lease Purchase is well suited for companies who would like to retain the car at the end of the contract as a company asset.
Customers can show the vehicle as a balance sheet item they can then write down the value against taxable profits and claim capital allowances.
Lease purchase provides for a balloon payment that is normally equivalent to the projected market cost of the car at end of the contract.
Optifleet is the solution for companies wishing to reduce fleet costs and add valued car benefit in a properly managed environment.
Once the scheme is in place it requires no company involvement as the system manages every aspect including car selection, online mileage, maintenance, accident management, etc.
If you are looking to give your business an injection of cash, then purchase and leaseback could be the choice for you, providing you currently own your company vehicles.
Your leasing company will value your fleet vehicles, usually based on industry guides such as CAP. They will then make you an offer for your fleet and offer you terms for a contract hire agreement based on mileage, term and estimated future value of the vehicle.
Once you have mutually reached an agreement, the lease company will give you a cheque in exchange for the vehicle V5’s. Once this has been carried out, you then start to make your monthly payments and your contract starts.