A few pointers for contract lease

Simon Gray, managing director of Credo Asset Finance, looks at contract lease.

Is contract lease really the way to finance a vehicle? My reply, as you might imagine, is yes and no. There is no definite right answer in my opinion.

Here are a few pointers that will help you decide:

Do you want to own the vehicle?

Would it be returned in good condition?

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How sure are you on the projected usage of the vehicle?

Are you VAT registered?

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Is it a business or personal purchase?

All relevant points, and I could write a column on each in more detail, but the biggest question is how flexible are you with choice of vehicle?

Contract hire or contract lease is the only finance product where the supply price is undisclosed – you don't know what the vehicle was actually supplied at and you never will – it's irrelevant. You only know and are interested in what you pay each month.

Because the price is never disclosed, manufacturers use contract hire to increase their market share, get rid of overstocked models or help with the runout of an old model before the new one is launched. Because the price is not disclosed, this marketing tool doesn't affect the price of the manufacturers' vehicles on their dealers' forecourts. You can imagine that if there was £5,000 effective discount available on a new vehicle they wouldn't sell many demonstrators or late-date used ones and even the one and two-year-old cars would look expensive.

So if you want a specific car, in a certain colour with certain extras, you've got to be very lucky for it to be available on a special deal. You need to be flexible and lead the suppliers of the contract hire to which sort of car you want – a diesel 4x4, a 1.4 or smaller five-door hatchback for example. We can then direct you to vehicles where bonus money is available and where you will see true value and sometimes unbelievably competitive monthly costs. It's not unusual to see a £35,000 car available at £350 a month plus VAT. The sums don't add up without a substantial level of manufacturer bonus.

If you have specific finance questions email us at Credo – your question could feature in a future column.

Credo Asset Finance is at 85 Yarmouth Road, Norwich, NR7 0HF. Telephone 01603 703180, email sales@credoassetfinance.com or visit the website at www.credoassetfinance.com

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