WHY CHOOSE LEASING FOR A CAR OR VAN?

WHY CHOOSE LEASING FOR A CAR OR VAN?
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Date: 8th Mar 2016

Cars and vans are depreciating assets as soon as you start driving them. So the best thing to do is to lease them not buy them.


WHY CHOOSE LEASING FOR A CAR OR VAN?

Why buy a depreciating asset when you can lease it

A good start-point is billionaire oil tycoon J. Paul Getty’s famous quotation – “If it appreciates, buy it. If it depreciates, lease it”. This encapsulates the main benefit of vehicle leasing. A car or a van is not like a house which usually appreciates in value after purchase, whereas when you drive away in your brand new vehicle it is already losing value.

If you take out a vehicle loan or finance agreement to purchase a car or van you are simply paying a set amount a month for something that is losing, rather than gaining, value. In simple terms, you are buying a product which is depreciating not only every time you drive it but also when it is sitting on your drive.

Leasing is a different proposition for drivers. Instead of owning the vehicle, the driver pays a monthly amount to use that vehicle over a set period of time (usually between 24 and 60 months), and at the end of the agreement the vehicle is taken back by the leasing company.

Another option that come under the umbrella of leasing is Contract Purchase, this gives you the option of ownership at the end of the term by offering a guaranteed future value at the onset of the agreement, and like leasing is available to both business and private users, subject to credit approval.

Benefits of vehicle leasing

  • Monthly repayments will usually be less costly than the repayments on a car loan. Also, in the majority of lease agreements, only a small deposit is necessary, often amounting to just three monthly payments.
  • One of the biggest attractions of car leasing is that you are able to drive away in a car that might otherwise be out of your price range if you were to buy it outright.
  • The vehicle manufacturer warranty will normally cover the period of the lease, and maintenance costs can also be covered. Road tax is also usually included in the lease.
  • No huge up-front costs, capital outlay or car loans.
  • Fixed-price motoring where most costs remain the same for the period of the lease.
  • You can drive a brand new car every two to five years and benefit from the safety, fuel economy and performance advancements found on newer models.
  • Companies may be able to offset rentals against taxable company profits.
  • VAT registered companies can claim up to 50% of the VAT paid on car lease rentals, and up to 100% on commercials.

So, the next time you're tempted into a new car showroom, by all means check out the model you're interested in, but make sure you weigh up all the advantages of leasing it instead of buying it.

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Written By

Mike Knowles
Yorkshire Vehicle Fi...
Sheffield
0114 236 1818

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