Businesses understand that not everything is certain and yet they are allergic to uncertainty. This is why they search for the best way of doing certain things that remove as much uncertainty as possible. Business car leasing is on the rise and is growing more popular. It offers certainty in an uncertain time.
None of us knows what is going to happen in the future. We can make predictions and try to plan ahead to avoid any catastrophes. Car leasing offers flexibility and affordability for customers, which helps them to weather any potential storms in the future, whilst delivering great cars. For businesses, this seems to be the most popular way to go.
How business car leasing works
Businesses don’t need to be tied down to cars unnecessarily, which is the case when they apply for car finance. Car finance options like Hire Purchase mean that businesses are on their way to paying for full ownership of the vehicles in their fleet. This isn’t always the best course of action to take.
Car leasing gives a real alternative. Instead of paying to own the car, car leasing is more of a long-term rental of a car fleet.
Business Car Leasing works by you being able to pay a deposit, followed by a series of monthly payments and at the end, depending on your chosen lease option, you will have a choice.
Car leasing doesn’t pay for the value of the car. It pays for the depreciation of the car over the period of the lease. This means that the price of your lease agreement will always be lower than a finance agreement. However, this is also why you are asked to choose how long you want to lease the car for and how many miles you are going to drive each year. The longer the lease, the more your car will depreciate. The more miles you drive the more it will depreciate. These are all factors to consider.
Business Contract Hire
Business Contract Hire is the purest form of car leasing available. As a business, you can lease the car for the agreed period of time and then you must hand the car back. This means you aren’t tied down at all to the car following the agreement.
At the beginning of the agreement, you have a choice. You can choose to pay a deposit and that itself comes with four more options.
- A deposit worth three months of payments
- A deposit worth six months of payments
- A deposit worth nine months of payments
- No deposit car leasing
A deposit is not mandatory but it is advantageous as it pays a chunk of your agreement off right at the start. If you choose not to pay a deposit, the deposit amount and calculated depreciation are spread evenly across the series of monthly payments, meaning you pay more per months.
This is the option for those businesses that never wish to be tied down to a car. You want the chance to simply hand the car back hassle-free.
Business Contract Purchase
However, there will be those of you who want more flexibility. You want the choice at the end to either hand the car back if not financially viable or you want the chance to purchase the car outright. This is where Business Contract Purchase comes in.
Whilst officially it is a finance option, Business Contract Purchase uniquely holds the line between Hire Purchase (finance) and Contract Hire (leasing) by offering both in one package. What we mean by that is that when a Business Contract Purchase comes to an end you can either hand the car back or pay off the balloon payment to take full ownership.
The balloon payment is the Guaranteed Minimum Future Value calculated by the lender at the start of the lease. This is a calculated estimate of how much the car will be worth at the end of the lease after it has suffered depreciation loss. You will then have the option to pay off that value to own the car or you can return the cars.
Choices as a business
Businesses have many decisions to make with how they run themselves. When it comes to acquiring a fleet of cars, affordability should be a priority and car leasing offers that. If you know the type of car you want, compare between leasing with Hippo Leasing and car finance and you will see that leasing is the more affordable option if you want a newer fleet of vehicles.
If you are interested in leasing cars for your business, enquire with Hippo Leasing and their dedicated team will find the right deal for you and your business.