There are several options available for renting a van, such as contract hire, contract purchase, and finance lease.
Rental contract:
Leasing is a type of rental option that is long-term and can be availed by business owners who want to lease a commercial vehicle in exchange for minimal monthly installments. This does not imply any monthly fee or risk related to depreciation. This is also void of disposal issues as the contract comes to an end.
In the case of a rental contract, it is the financial company’s responsibility to make the investment in the vehicle and suffer the consequences related to its depreciation. In addition to that, the financial company also has to take care of the transfer of the vehicle at the end of the contract.
The duration of the rental contract depends on the financial institution. The standard duration is two to five years. If the leasing company or individual wants to take possession of the vehicle at the end of the lease, they must sign the agreement in exchange for a credit check.
The rental agreement includes monthly rents that are normally determined by the value of the vehicle. However, the estimated residual value depends on the duration and annual mileage of the vehicle offered in the contract. Monthly rents do not include maintenance, which is added to the total cost based on preference.
VAT registered business businesses are entitled to claim a full 100% VAT infused into the financing of the vehicle if only the vehicle or business van is used solely for business purposes. In the case of a contract that includes the cost of maintenance, VAT is reclaimable only on the service tax levied on monthly installations.
Purchase contract:
The purchase contract, on the other hand, is a financial agreement that allows the leasing company or individual to own the commercial fleet without facing the risks related to depreciation loss. In this case, a company first has to select a new vehicle suitable for the business purpose and pay an initial deposit which will then be followed by fixed monthly rentals. However, in the purchase by contract, the monthly installations are exempt from VAT. The company can buy the vehicle at the end of the contract in exchange for a negotiable price.
Financial leasing:
Financial leasing is a form of leasing where the owner of the vehicle is entitled to the finance company while the vehicle is leased to a commercial company. This is the commercial and widely used way of renting a vehicle. This comes without the pressure of heavy initial deposits.
