Main types of car leasing
When you need to get a car, you can either buy it or rent it. But when you need to get a car very fast, the best option for you is to lease it. Today car leasing companies offer a number of possible ways to lease a car. Note that the terms and conditions of a leasing contract may slightly vary depending on the type of a lease. Generally, there are four types of auto leasing. These types are known as leaseback, contract hire, contract purchase and finance lease.
Contract hire is probably the most flexible type of car leasing. This type of leasing is available both to individuals and to legal entities. Provided for a period of 2 to 5 years, this long term lease is an ideal option for those customers who prefer to make small payments on a monthly basis rather than to purchase a car. With contract hire, you do not need to worry about such things as depreciation or car sales. You can lease either a new car or a used car, but keep in mind that in the latter case it is in your responsibility to check all documentation and to make all necessary speed tests.
Contract purchase is another type of car leasing or lesingbil in Danish terminology. This type is only available to legal entities. In most cases, you will be offered to lease an expensive car or a business class car. With contract purchase, you are offered a possibility either to buy out a car in the end of the contract term or to return it to the leasing company. The biggest difference between contract hire and contract purchase is that in the latter case you need to make a down payment. You also need to make installments on a monthly basis, and the car is considered to be an asset of your company.
Leaseback is the next type of car leasing which is available to legal entities only. With this type of leasing, you can sell your car to a leasing company and then you can lease the car back. The company buys the car for its market value and offers you an opportunity to lease your car once again. All other terms and conditions of leaseback are very similar to the terms and conditions of contract hire. The only difference is that you will have to pay VAT.
As a business owner, you can also choose such type of auto leasing as finance lease. The terms and conditions of this type of leasing suggest you to pay for all the depreciation expenses, as well as for auto insurance, taxes, and maintenance fees. Finance lease is pretty much the same as contract hire, but can be much riskier for the client. Note that you will be fully responsible for the leased car, and you will have to cover any repair costs in case of road traffic accident. This is why you may want to check the documentation and to test the car before signing up your leasing contract.
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