When it comes to acquiring a vehicle for your business, you may have heard the terms „lease” and „contract hire” used interchangeably. However, there are some key differences between these two options that you should be aware of before making a decision.
Leasing a Vehicle
Leasing a vehicle is essentially renting it for a set period of time. You make monthly payments to the leasing company, and at the end of the lease term, you return the vehicle. You typically have the option to purchase the vehicle at the end of the lease term, but this is not always the case.
One of the main benefits of leasing a vehicle is that your monthly payments are typically lower than they would be if you were buying the vehicle outright. This can make leasing a more attractive option for businesses that want to keep their costs low.
Another benefit of leasing a vehicle is that you don`t have to worry about selling it when you`re done using it. This can be a major benefit for businesses that don`t have the resources or the desire to manage the sale of a vehicle.
Contract hire is similar to leasing, but there are a few key differences. With contract hire, you typically make monthly payments for a set period of time, just like with leasing. However, at the end of the contract term, you don`t have the option to purchase the vehicle.
Instead, you simply return the vehicle to the contract hire company and start a new contract if you need to acquire another vehicle. This can be a convenient option for businesses that want to consistently update their fleet without having to worry about selling old vehicles.
The main downside of contract hire is that it can be more expensive than leasing. Because you don`t have the option to purchase the vehicle at the end of the contract term, the contract hire company has to factor in the cost of depreciation when setting the monthly payments. This can make your monthly payments higher than they would be with a lease.
Choosing Between the Two Options
When deciding between leasing and contract hire, you`ll need to consider your business`s specific needs and budget. Leasing is typically a more affordable option, but it may not be the best choice if you need to keep your vehicle for a longer period of time.
Contract hire can be more expensive, but it may be a better choice if you want to consistently update your fleet without having to worry about selling old vehicles. Ultimately, the choice between the two options will depend on your business`s unique circumstances and priorities.
Leasing and contract hire are both viable options for businesses that need to acquire vehicles. While there are some key differences between the two options, they both offer benefits and drawbacks that you`ll need to consider before making a decision. By understanding these differences and assessing your business`s needs, you can make an informed decision and choose the option that is best for your business.