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A Comprehensive Guide to the Obtainable Leasing Options

There are various options available for hiring a van such as contract hire, contract purchase and finance lease.

Contract Hire:

Contract hire is one type of renting option that is long term and can be availed by the business owners who want to take business vehicle on lease in exchange of minimal monthly instalments. This does not involve any monthly instalment or risk related to depreciation. This is also devoid of disposal issues as the contract reaches its termination.

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

The duration of the contract hire agreement depends on the finance company. The standard duration is between two to five years. If the lessee company or individual wishes to take ownership of the vehicle at the end of the contract, he has to sign the deal in exchange of a credit check.

Contract hire includes monthly rentals which are usually determined by the vehicle value. However, the estimation of the residual value depends on the duration and the annual mileage of the vehicle offered in the contract. Monthly rentals are exclusive of maintenance which is added to the total cost on preference.

The business companies registered on VAT are entitled to claim a neat 100% VAT infused on the vehicle finance if only the vehicle or commercial van is availed solely for business purpose. In case of a contract including the maintenance cost, the VAT is reclaimable only on the service tax levied on the monthly instalments.

Contract Purchase:

Contract purchase on the other hand is a financial agreement that allows the lessee company or individual to own the business fleet without encountering the risks related to depreciation loss. Here, a company has to first select a new vehicle suited for the business purpose and pay an inceptive deposit which then is to be followed up with fixed monthly rentals. However, in contract purchase, the monthly instalments are devoid of VAT charges. The company can purchase the vehicle at the end of the contract in exchange of negotiable price.

Finance lease:

Finance lease is a form of leasing where the proprietary of the vehicle is entitled to the finance company while the vehicle is given out on rent to a business company. This is the commercial and extensively availed form of renting a vehicle. This comes without the pressure of hefty initial deposits.

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