What is leasing and how does it work? (Part 2 of 3)

Tuesday, July 04, 2006

Virginia car dealer RK Auto Group defines “Auto Leasing Lingo.”

Buy things that appreciate in value; lease things that depreciate in value.
J. Paul Getty

In What is leasing and how does it work? Part 1, Virginia car dealer RK Auto Group explained the concept of leasing a new or used commercial truck, van or car. Here in Part 2, we define some common leasing terms.

The key to getting smart leases on new or used commercial vehicles is understanding leasing terms.

1. Lessee/Lessor: The lessee is the person leasing the used commercial truck, van or car. The lessor is the financial company that leases the vehicle to the lessee.
2. Residual Value: When you lease a new or used commercial truck, van or car, the leasing company will project its “residual value” or what it is worth at the end of the lease. If residual value ends up higher than actual worth, you may be responsible for the difference. On the other hand, if it is lower, you stand to make money by paying the residual, and reselling at a higher price.

Leasing a new or used commercial truck, van or car for your business? Save money and reduce risk by choosing the right lease.

3. Closed-End Lease: When a closed-end lease ends, you can either walk away from the new or used commercial truck, van or car, or choose to buy it. You might even make a profit if, at lease end, the vehicle is worth more on the marketplace than the projected residual value.
4. Open-End Leases are used primarily for commercial business leasing. They hold several tax advantages for business owners, one being that leased vehicles do not show as liabilities, and thereby enhance debt to equity ratio. Leasing also frees up lines-of-credit, leaving businesses more available cash for inventory and expansion. For more on this, see the advantages of leasing new or used commercial vehicles for your business, from RK Auto Group, your leading Virginia car dealer.

Continue to What is leasing and how does it work? Part 3.

For expert advice on leasing new and used commercial vehicles, lower prices and fast, friendly service, choose Virginia car dealer RK Auto Group.

You and your business have unique needs. There’s more on how to effectively meet those needs in What is leasing and how does it work? Part 1. Or, ask the commercial leasing experts at Virginia car dealer RK Auto Group to find the solution that works for you. Email mferes@rkautogroup.net or call 757-486-2222 today.