Vehicle leasing - AbsoluteAstronomy.com

Vehicle leasing is the leasing

Leasing

Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible payments....

(or the use of) a motor vehicle

Motor vehicle

A motor vehicle or road vehicle is a self-propelled wheeled vehicle that does not operate on rails, such as trains or trolleys. The vehicle propulsion is provided by an engine or motor, usually by an internal combustion engine, or an electric motor, or some combination of the two, such as hybrid...

for a fixed period of time. It is commonly offered by dealers as an alternative to vehicle purchase but is widely used by businesses as a highly cost-effective method of acquiring (or having the use of) vehicles for business, without the usually needed cash outlay. The key difference in a lease is that after the primary term (usually 2,3 or 4 years) the vehicle has to be returned to the leasing company for disposal.

Rationale

Leasing offers advantages to both buyers and sellers. For the buyer, lease payments will usually be lower than payments on a car loan would be, and qualification is often easier. Some consumers may prefer leasing as it allows them to simply return a car and select a new model when the lease expires, allowing a consumer to drive a new vehicle every few years without the responsibility of selling the old vehicle. A lessee does not have to worry about the future value of the vehicle, while a vehicle owner does.

For the lessor, leasing generates income from a vehicle the lessor still owns and will be able to lease again or sell through vehicle remarketing

Vehicle remarketing

Vehicle remarketing is the controlled disposal of fleet and leasing vehicles that have reached the end of their fixed lease term.In vehicle leasing, after the lease expires, the lessee either returns the vehicle to the supplier or buys it...

once the original (or primary) lease has expired. As consumers will typically use a leased vehicle for a shorter period of time than one they buy outright, leasing may generate repeat customers more quickly, which may fit into various aspects of a dealer's business model.

Lease agreement

Lease agreements typically stipulate an early termination fee and limit the number of miles a lessee can drive (for passenger cars, a common number is 10,000 miles per annum though the amount can be stipulated by the customer and can be 12,000 to 15,000 miles per year). If the mileage allowance is exceeded, fees may apply. Dealers will typically allow a lessee to negotiate a higher mileage allowance, for a higher lease payment. Lease agreements usually specify how much wear on the vehicle is allowable, and the lessee may face a fee if that amount of wear has been exceeded. A lease with maintenance (commonly known in the UK as Contract Hire) can include all vehicle running costs excluding fuel and insurance.

The actual lease payments are calculated very similarly to the way loan payments are, but instead of an APR, the company uses something called the money factor.

At the end of a lease's term, the lessee must either return the vehicle to or buy it from the owner. The end of lease price is usually agreed upon when the lease is signed.

Rationale

Lease agreement

See also