When a business is looking to finance their vehicles, Finance Lease and Contract Hire are usually the most popular options. There are many different reasons why you might choose one over the other; in this blog we want to explore resale risk vs reward.
One of the key things to consider when choosing between Finance Lease and Contract Hire is whether you want to be responsible for the resale of the vehicle at the end of the agreement – there are pros and cons of both.
Contract Hire – No resale risk, no reward
With Contract Hire you get a fixed monthly payment at the start of the agreement based on the term and mileage. The agreement runs for the set term and at the end the car is returned to the finance company who then sells the vehicle. Depending on market conditions the vehicle may be worth more or less than the residual value predicted at the start of the contract. This means the finance company takes the hit if the value is less but will also benefit if the value is higher.
To learn more about Contract Hire for your business visit our Business Contract Hire page
Finance Lease – Resale risk, with potential rewards
Conversely to Contract Hire, with finance lease, the responsibility for the vehicle resale at the end of the agreement sits with you, the customer. This means that if market conditions are favourable then the rewards from selling the vehicle are yours to keep. However, if a negative change in conditions could mean the vehicle costs you more than previously expected.
When deciding your businesses finance options, make sure you consider if you want to take on the responsibility for selling your vehicles and whether the potential rewards are enough to take on the risk.