Leasing

Be clear about leasing

Leasing is really just another form of borrowing to finance a car. But unlike loan finance - where you take ownership of the car and offer it or something else as security to the lender – lease finance sees a leasing company take ownership and give you the use of the car under contract for a specified period.

Don't get caught by the balloon

Know what 'residual' or 'balloon' payment will be required from you at the end of the lease term. This may well have a significant effect on your cash-flow.

Get tax advice

Consult your accountant or financial adviser as to what tax implications there may be before committing to lease finance.

Have the right information when applying

What you will be required to supply in any application for lease finance will depend on whether the lease is for personal or business use.

Personal lease applications will require:

• proof of current employment
• income details or tax returns

Business lease financing requires more detailed information and may include your:

• balance sheet
• tax returns
• cash flow projections
• business plan

Confirm with the lender what you will need before the interview.

Keep accurate records

Keep accurate records of your deposits and ATM transactions. It is also wise to keep copies of your loan application and approval documents in a safe place.

This is the best way to avoid hefty fees which may be charged by a bank when its customers want to see copies of their cheques or loan files.

Know what interest rate is being charged

Make sure that you determine the actual interest rate being charged in any leasing deal you consider.

Those offering you lease finance will invariably avoid talking about the interest rate and only talk in terms of the monthly repayments you will be up for. But the only way to accurately compare leasing quotes is to ask for the rate being charged; like you would do with any other form of borrowing.

Leasing is often chosen as a financing option on the basis that it's easily incorporated in budgets and cash-flow planning. This is a valid approach but make sure you look at the interest rate too.

More:

Leasing is really just another form of borrowing. Refer to our Tips & Tricks for business loans for more helpful information.