Leasing is a contract between the owner of an asset (referred to as a Lessor) and the hirer (Lessee) for the letting of (leasing) an asset.
The contract would allow the lessee to use the asset for a specified time.
2. Concept of Leasing
Basically, leasing allows Lessee to drive a new car every few years, which can save substantially in repairs and maintenance.Leasing is a commercial finance product which enables the customer to have the use of a passenger or commercial vehicle without the hassle of maintenance and insurance/road tax renewal, while the financier retains actual ownership of the vehicle.
Leasing a car is an attractive option because Lessee’s monthly payments are generally much lower than if it is hire purchase.
3. Lease Rate
At the beginning of the lease, the lessee may have to pay a refundable security deposit; an acquisition fee; license, registration and title fees; and taxes.
4. Lease Term
The lease term usually spans between 4 to 7 years with commercial vehicles generally engaging in longer term lease. The minimum term however is 2 years.
5. Benefits of Leasing
• Round the clock maintenance and back-up services
• Service and maintenance are included and financed in the monthly leasing fee
• Competitive monthly payment vs. HP (subject to package)
• Avoid CAPEX build up in fleet vehicles & company can focus more on its core business
• Car replacement program during breakdown and accident
• Low upfront payment vs. HP down payment to own vehicles
• Better business projection, ie. fixed monthly cost for fleet vehicles and also save on manpower cost
• Vehicles will be returned and replaced with new ones after lease period
• Able to uphold the company’s vehicle replacement policy
6. Customer Service
Among the benefits of leasing offered to potential customers includes a 24 hours call center of which the customers may contact in the event of emergency.
The call center also provides other services to the customers to remind and to follow up with the customers on any inspection required by any authority, maintenance services, insurance and road tax renewals.
It is ideal for corporate clients who wish to save additional cash, as lease does not require a large sum of capital to lease a vehicle. It creates a stronger company financial and cash flow statement at the end of the year.
7. Calculation of a monthly lease rental
The lease rentals are added in together with the schedule and unscheduled maintenance and other ancillary services in calculating the total lease cost. This cost is then divided by the total months of the lease to derive the monthly rental.