Car leasing on Business hire purchase Option

Business hire purchase option is yet another form of car leasing. In this kind of vehicle leasing contract, the customer makes a lump sum payment at the end of the car leasing contract. A balloon payment at the end of the term of the lease has also to be made. Otherwise, it is similar to the traditional hire purchase plan from the car leasing company.

Business hire purchase option is suited for those companies which do not have VAT registration. Every car purchase plan should address the needs of the customer. Find out your own particular need and then decide on the kind of car that would be best for you. Accordingly, you may go in for the best kind of hire purchase plan for a new or old car, small or big, as your own need may be. Business hire purchase option allows you to use the car for a certain time period while paying a monthly rental for it. At the end of the contract term, you have the option of buying the car outright. If you do not wish to keep the car, you may return it to the dealer. You can have both these options open till the end and this is rather convenient.

Some advantages are that the contract charges are free of VAT, there are no penalties on mileage and any interest charges incurred may be offset against profits for which you are taxable. You can show the vehicle as an asset in your balance sheet. The car can release capital at the end and you may use this capital in your business. You can claim total ownership of the car and are responsible for the use and disposal of the car. Many businesses will find it very important to safeguard their fleet arrangements from mileage penalty. If you can predict how many miles each of your vehicles will cover, it’s fine, but many companies won’t be able to do that and the BHP is a perfect option for them.

The disadvantages would be that you have to arrange to collect or deliver the vehicle, you may lose money on the value of the vehicle at the end of the term of the contract. There is also the possibility of depreciation and this is an added risk. The client has to bear any residual value.
There are still people who will go in for a loan from a bank to cover the cost of their flashy car. Their business may require them to be seen around town in big and swanky cars, but they may not yet have started earning large salaries. Any kind of failure to pay will result in forfeiture of the car. Business hire purchase option in car leasing does not allow such a thing to happen.

You really have to decide what is better for your business. If in doubt consult your accountant or even check with your local chamber of commerce, which should have some advice for you. In many cases businesses will benefit for vehicle lease if the right purchase option is chosen.
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