BY JELANI DANIEL
In my previous column, a brief summary of what financing entails was provided, breaking down how banks, dealerships, and brokerages handle various financing and loan options to buyers. Financing, as a whole, is one option, but within the bubble of financing, there are leases. Each option suits various lifestyles and credit scores. Today, I will outline three different types of lease options and what they contain, letting you see first-hand which option is most suitable for your needs.
Note: Financing approvals are often based on current credit scores, so some options may be unavailable to those in different credit brackets.
FINANCE LEASE:
A lump sum is not required in this case since the purchaser of the vehicle is the financer. The financer will take possession of the car, and much like a landlord, issue monthly charges to the leasee. There is no need for a large deposit or time-consuming loan. Such lease options are great if you are looking for an automobile quickly and have little to no initial capital to invest.
The driver has responsibilities that include the residual risk and general upkeep. At the end of the agreed upon lease term, the leasor has the option to refinance, buy, or trade-in the car.
OPERATING LEASE:
An operating lease is very similar to a finance lease, but the residual risk mentioned above does not apply. Instead, the car is paid month-by-month and can be obtained quickly. The leasee can continue to rent the vehicle or upgrade to a newer model at the end of the lease term.
COMMERCIAL HIRE PURCHASE LEASE:
The financer obtains the automobile initially from a manufacturer or dealer. The vehicle is then granted to a leasor, and upon completion of payments, is bought by the leasee. When the loan is paid off, the hired renter can then take full possession of the car. This allows the use of monthly payments without a hefty initial deposit.
The three options listed above include no down payment as well as standard and fixed rates. This gives the leasor sensible options when considering which automobile they would like to obtain. As well, tax-deductions may be issued on the operating leases as well as the finance leases, so speak to your broker today to see which option suits you best.
