Contract hire car leasing is perhaps the most simple form of leasing for both individuals and businesses. Each contract runs for a set period, after which the vehicle is returned to the lease company with no further obligation. A lot of individuals and businesses may be unaware that some types of vehicle leasing actually allow the lease customer to buy the vehicle at the end of the contract, or at least have some form of stake in its sales potential.

Contract purchase, for example, gives the lease customer the option of buying the vehicle at the end of the hire period at a pre-agreed price. Lease purchase, on the other hand, is a business-only option that actually commits the business to buying the vehicle at the end of the run. Using vehicle leasing as a form of deferring payment for a car or van can have its merits, particularly if the vehicle in question has a high estimated chance of reasonable long-term viability. In addition, the lease customer will benefit from this arrangement if the vehicle turns out to have a higher than expected market value, when the contractually agreed purchase price kicks in.

Meanwhile, a finance lease is a more complex business arrangement, whereby the business benefits from the sale of the vehicle at the end of the term and uses the funds to pay what it owes the leasing company.Lots of car owners are trading in their old vehicle for a brand-new model, yet paying far less than normally required. What is more, after three or four years they are able to upgrade to another brand new model for the same amount. The reason they can do this? Car leasing.

Car leasing allows a driver to keep the same vehicle on the road and use it as if it were his or her own, for far less than the price of buying the vehicle. Although there are some yearly mileage restrictions, most drivers find these are actually more than adequate for their needs. Car leasing is cheaper than buying because the driver is only paying what the vehicle is projected to lose in value during the lease period, together with a small ‘money factor’. Moreover, a car leasing company will usually permit the driver to use his or her existing vehicle in part exchange. In addition, because lease payments are taken monthly, they are far easier to budget for.

Although some car leasing agreements give the driver the option to purchase the vehicle at the end of the lease period, most lease customers find that they are happy to return the vehicle at the end of the term, so as to avoid the problems connected with depreciation and maintaining an older vehicle. They are then free to lease a new model at a comparable cost.

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