The monthly rental is determined by the cost of the vehicle, the duration required and the estimated residual value of the vehicle, which is based on the expected annual mileage. In addition, included in the rental is a fee for vehicle maintenance and an administration charge levied by the lessor.
The leasing company retains ownership of the vehicle. This eliminates the need for large capital outlay, which appears on your balance sheet and impacts cash flow.
The money that you would have used to pay for the vehicle is no longer required and is therefore available to invest elsewhere to fund the growth of your company Fixed rental allows for budgeted predictable cash flow Maintenance packages are usually included. With maintenance, financial responsibility for the up-keep of the vehicle is passed to the service provider and can cover servicing, mechanical repair, tyres, exhaust and road fund tax. If your company is registered for VAT, you can reclaim half of the VAT on the rental charge and all of the VAT on the maintenance element The choice of vehicle and options in the contract are flexible Typically there is no need to pay an initial payment At the end of the contract, assuming terms and conditions have been adhered to, there are no further cost obligations, no residual or disposal risks – just hand the vehicle back.