Car lease finance
Car Lease Finance implies financing a car for a specific period of time. The concept of car lease finance is not similar to car renting. A renting of the car is for 2 or perhaps 3 days but, the leasing period is a minimum of 2 years. Car lease finance helps the customer to make use of the car as well as take the ownership of the car for a specific period of time. However, the original owner retains the ownership for a lifetime.
The process goes like this firstly a lessee requires negotiating the cost of car with its dealer. After the price is arrived on, the leasing company purchases the car sold by the dealer at the same price. In such case, the dealer is just a mediator between the leasing company and lessee. The dealer in turn of his services is offered a commission. Subsequent to the signing of the contract of lease, the lessee requires paying the monthly installments, pay the taxes of the vehicle, maintain proper insurance, and pay the fee for licensing as well maintain the car from any kind of accidents.
Towards the end of contract, the lessee needs to return back the car to the leasing company. Besides the normal wear and tear, if the car has any damage it needs to be compensated by the lessee. In addition, the lessee requires paying the mileage that is exceeding beyond the committed level specified in the agreement. Alternatively, a lessee can choose to buy the car by paying the additional amount. However, owing to the equity value accompanied with a car, it is strongly suggested to return back the car instead of purchasing it.
Benefits of Car Lease Finance :
The advantages of the Car Lease Finance are mentioned below:
The monthly installments are usually 30 to 60 percent less than what is required to be paid for a loan on purchase. As the monthly costs are less, a person can drive new brands every 3 to 4 years.
The contract time period is flexible arraying from 2 years to 5 years.
Interest rates are fixed and not dynamic in nature.
The monthly payments or rentals of leased cars are also fixed and not subjected to increase.
A deduction in the tax can be attained, if the car is utilized for the business intents.
Since the lease is safeguarded alongside the car, lower interest rates are attainable.
Sales tax is required to be paid for the term of usage value and not for the total worth of car.
The burden of selling a second hand car is not on the user, since the expiry of the agreement ensures the return of car to its leasing company.
Types of Car Lease Finance :
Basically, two types of Car Lease Finance persist, one is the closed end leases and other is open end leases. In the closed one, a lessee has the choice of returning the car during the end of the term. There is no responsibility on the lessee to compensate for the mileage or the damage. On the contrary, in open end lease, a lessee has to accept all the financial risks and cost burdens.
Other Articles