Contract Hire may be good for business
As George Osborne delivered his Budget report speech last month, we all knew we could expect to tighten our belts as the coalition Government looked to cut the country’s record Budget deficit. Measures such as a VAT increase to 20 per cent are particularly going to affect the motor trade. Cars are usually the second biggest purchase the typical consumer makes, as such the added VAT will affect the price of the average car by hundreds of pounds (for example a £12,000 car currently attracts £2,100 added in VAT, that rises by £300 in January when the VAT rise comes into place).
That’s not all; a rise in Insurance Premium Tax (IPT) to 6 per cent from 5 per cent in January will also affect the cost of warranties and motor insurance on new cars too.
And with further increase in fuel duty due in Octo ber, many motorists may be considering the best way to keep their motoring expenses down.
With the transport sector set to take its fair share of the spending cuts and taxation hikes one website thinks it has the answer to help motorists fix their motoring costs over the coming years; contract hire. It has long been predicted that as motoring costs continue to rise, driven by high fuel prices and increasing taxation that contract hire would rise in popularity among beleaguered motorists.
While it might not suit every driver, Contract Hire And Leasing.com thinks now is the ideal time to reconsider whether leasing rather than buying your next car is for you:
The Benefits of Contract Hire:
- 1. You can afford a brand new car every two to three years- newer cars feature the latest technologies-making them safer and more fuel efficient. Not only does this mean that you can afford a more desirable car but you’ll save on fuel expenses, taxation, repairs and maintenance. Plus new cars are covered by the manufacturer’s warranty so there is less to worry about.
- 2. Fix your maintenance costs: while new cars tend to need very little TLC, what they do need can be built into your contract to include maintenance.
- 3. Lower payments than a car loan: Payments on a contract hire vehicle are typically significantly lower than repayments on a car loan because you are not paying for the entire cost of the car; you are just paying for the use of the car.
- 4. Forget depreciation: At ContractHireAndLeasing.com, we are very found of quoting billionaire oil baron, Paul Getty who said: “ If it appreciates, buy it. If it depreciates; lease it.” Wise words indeed. Contract hire means you simply pay a monthly fee for the lease of the car. The cost of its depreciation is fixed at the start of the lease term in your monthly fee. At the end of the lease term, the vehicle returns to the leasing firm where its continuing decline in value is deferred back to the company.
- 5. No huge up-front costs, capital outlay or car loans: Most contract hire providers are flexible on the terms of your lease, the typically the down payment on a car is usually equivalent of three of your monthly payments- much less than the typical deposit to buy a car.
- 6. Drive the dream: Leasing often means that you can afford to drive a car that might otherwise be beyond your budget if you wanted to purchase it through a car loan.
- 7. No surprises: No worries that outstanding finance or the trade-in value of the car being lower than the amount you owe.
- 8. Free-up capital: For businesses or the self employed, buying a vehicle means tying up value cash-flow into a fixed, depreciating asset. Free up the capital tied in your old vehicle by selling it and leasing instead at a fixed, monthly cost. Contract hire is also a very tax efficient method of acquiring a vehicle; write down allowances mean that businesses can write a percentage of their monthly rental costs against company pr ofit.
Worth consideration? Always take accountants advice…
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