Vehicle leasing

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Vehicle rental is the lease (or use) of a motor vehicle for a certain period of time with an agreed amount of money for the lease. It is commonly offered by dealers as an alternative to vehicle purchases but is widely used by businesses as a method of obtaining (or owning) a vehicle for business, without the usual cash outlay required. The main difference in the lease is that after the main term (usually 2, 3 or 4 years) the vehicle must be returned to the leasing company or purchased for residual value.

Video Vehicle leasing

Rationale

Car rentals offer benefits for buyers and sellers. For buyers, rental payments will usually be lower than payments on car loans. Each sales tax will be paid only on every monthly payment, not directly on the entire purchase price as in the case of a loan. Some consumers may prefer a rental because it allows them to return the car and choose a new model when the lease expires, allowing consumers to drive new vehicles every few years without the responsibility of selling old vehicles, or possibly repair costs after the manufacturer's warranty expiration. A tenant does not have to worry about the future value of the vehicle, while the owner of the vehicle. For a business lessor there are tax advantages to consider.

For sellers, leases generate revenues from vehicles that the seller (or manufacturing company) still owns and will be able to rent again or sell through remarketing of the vehicle after the original (or primary) lease has expired. Because consumers will typically use rented vehicles for a shorter period than they buy directly, leases can generate repeat customers faster, which can fit into various aspects of the dealer's business model.

Maps Vehicle leasing

Market penetration

The average retail market penetration rate Leasing in the United States for new passenger vehicles hit an all-time high of 26.5% in February 2014. This was a recovery from a severe downturn during the 2007-08 financial crisis. By 2016, leasing accounts for about 25 percent of total vehicle sales or 31 percent of retail sales in the United States.

The prevalence of leases in the United States for GM, Ford and Chrysler has risen close to industry norms since reaching the lowest figure in 2009, but still lower than BMW and Mercedes-Benz.

Leasing is the second most popular form of second-hand consumer finance in the UK after the purchase of a private contract. The overall value of the private leasing market grew by 12.7% in 2017 and currently accounts for 9.2% of all sales financing points provided to consumers for new car purchases, according to ContractHireAndLeasing.com Personal Leasing Report 2017.

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Rental agreement

The lease agreement usually determines early termination fees and limits the number of miles a driver can drive (for passenger cars, the usual amount is 10,000 miles per year although the amount can be set by the customer and can reach 12,000 to 15,000 miles per year). If mileage allowances are exceeded, fees may apply. Dealers usually allow tenants to negotiate higher mileage allowances, for higher lease payments. The lease agreement usually determines how much wear and tear on the vehicle is allowed, and the lessee may face costs if the amount of usage has been exceeded. Rental with maintenance (commonly known in the UK as Lease Contract) may include all running vehicle costs including fuel and insurance.

Actual rental payments are calculated in very similar ways to loan payments, but instead of APRs, companies use something called the money factor.

At the end of the lease term, the tenant must return the vehicle or buy it from the owner. The end of the rental price is usually approved when the lease is signed.

Usually a leasing company will have a minimum rental length like 24 months to 60 months. Recently a new view of leasing is that the market has grown for short-term leases called 'lease-flexible'. Flexi-rent is when one can rent a new vehicle for 3 months and then choose to hand over the van/van or indeed extend the lease for another period. This is almost the same as car rentals, but usually involves a financial company or a leasing company that maintains and is responsible for the vehicle.

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See also

• Rent Rent and Rent-to-own
• Closed rentals
• Installment package
• Car debts
• Novated lease
• Cross-border rentals
• Private Contract Purchases

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References

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External links

• BVRLA (British Car Rental and Car Hire Association)
• FLA (Financial and Leasing Association)

Source of the article : Wikipedia