(PRWEB) January 9, 2005

An aircraft or marine note is created when either is purchased and the seller (either an aircraft dealer or an individual) provides the financing. Diversified Financial Services represents funding sources that purchase existing notes for cash. For aircraft and marine manufactures and dealers we can also work with you to arrange point of sale funding. This allows you to offer financing to your customers without having to secure bank lines of credit. Funding sources can also serve as an alternative form of financing source to flight schools that have trouble securing funds from banks due to length of time in business to purchase aircraft.

Leasing opportunities:

You know the needs of your business. You know the benefits of having that new equipment to increase the efficiency and productivity of your operation. You can select to lease the equipment you need without tying up valuable capital and lines of credit. Leases are paid with before tax money. Commercial aircraft leasing financing is available to international locations.

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, Vocus PRW Holdings, LLC.
Vocus, PRWeb, and Publicity Wire are trademarks or registered trademarks of Vocus, Inc. or Vocus PRW Holdings, LLC.

A lease to own, also called rent-to-own, or lease option, gives the tenant the right to purchase the rental property at some future time. In return for this right, tenants pay an option premium, which consists of a one-time fee when the contract is signed, as well as an ongoing monthly premium in addition to rent. This onetime fee at move in could possibly be in the form of security and pet deposits. The option premium becomes all or part of down payment on the house if the tenant exercises the option to purchase. If the tenant doesn’t exercise this option, or cancels it prior to the end of the lease to own term, you get to keep the premium.

There are two types of lease to own options: short term and long term.

Short term / traditional lease to own

A short-term lease to own ranges from six months to one year. This is not what we will focus on in this article. Our goal is to have a longer term, stable tenant. Therefore a short term lease to own contradicts our goal. A short term is ideal if the seller is wishes to sell soon, yet finds this difficult to due to either the market condition or the buyer’s inability to get a mortgage. The sale price should be agreed-upon by both parties when the lease to own is signed, since the time value is diminished or very minimal.

Long term floating price lease to own

On the other hand, a long-term lease to own option expires in three to five years. This is what this article is focused on. It is a more attractive choice for both seller and buyer. Due to its long term nature, the seller is able to collect more option premium and enjoy a lower tenant turn over rate. In addition, the buyer is able to accumulate a sufficient amount of the down payment and repair credit. This arrangement really works favorably for both parties.

The purchase price, traditionally, is pre-determined at lease signing. Our Do-It-Yourself Kit: Long Term Lease To Own sets a floating price within a price range, especially if it is a long term contract. This gives more flexibility and protection to both parties.

What Are the Benefits of Lease to Own?

A lease to own creates a win-win situation for both seller (owner) and buyer (tenant). We will explain not only the benefits to the owner so you are convinced but also the benefits to the tenant so you can convince them.

Owner’s Benefits

Less tenant turn over

No landlord likes to change tenants because it involves a good amount of time, capital in advertising, and cleaning and repairing the house. The house may sit without being rented for a long time if the market is competitive. So how do you make sure this is less likely to happen? The trick is to make the tenant feel a sense of belonging. No one likes to move if its unnecessary, especially if one is a homeowner. A lease to own contract makes the tenant feel the privilege and the pride of home ownership. Tenant’s investment on the house also makes him more likely to stay put.

Quality tenant

It’ s a nightmare to dealing with or having to evict a bad tenant. Getting a quality tenant for makes stress free property management down the road. A little more time and effort in finding a quality tenant is well worth the effort. Better safe than sorry, right? Lease to own by nature filters out the unfit. Since lease to own requires option premium from the tenant, those can afford this generally are better in financial standing. Furthermore, those tend to be more responsible and reliable as they consider themselves more of a home owner rather than a regular renter.

Lower maintenance costs

It is human nature that people tend to care for their own things more than those owned by others. Since a lease to own tenant is virtually a homeowner, the sense of home ownership makes the tenant treat the house like his own. Gone are the minor maintenance requests from the tenant. The tenant is also more likely to take preventative measures, such as changing air filter and caulking.

Elimination of property manager

You are putting property management in auto pilot mode. As aforementioned, when the tenant is responsible for maintenance, you cut the cost of using a local property manager. You can even share this savings with the tenant by reducing the rent.

Higher monthly rental income

Cash flow is important to investors. With lease to own, you are able to collect more income and put this additional income into a good use. Here is a practical example. If the fair market rent is ,000, you can market the house for lease to own at ,050, and out of it is the option premium. This makes actual rent 5 (,050-), which appeals to the tenant. Yet your monthly income is ,050. That is additional cash flow beyond the fair market rent. If the tenant does not buy the house at the end of the lease term, you get to keep these premiums. On the other hand, if the tenant does buy the house, then you have received a good return on your investment.

Increase in house value

The tenants are likely to increase the value of the house. For example, they might make a nice backyard, install an expensive lighting fixture, or buy nice window drapes. This increase in value will be beneficial, regardless if they purchase the house or not. If the purchase does not happen, most likely you will be able to keep all the home improvements. If the purchase happens, the sale figure may be higher due to the improvement.

Save real estate agent fees at purchase transaction

Since you have located your buyer, you don’t have to shell out a big chunk of money in paying real estate agents for bringing you the buyer. Nor will you need you pay the seller’s agent for marketing the house. If you choose to use an agent to facilitate the transaction and paperwork, the fee will be considerably less than the full blown commission that is usually at 6% of the transaction amount. Another saving might be the elimination of home inspection if the buyer deems this unnecessary.

Tenant’s benefits

Saving for house purchase down payment

Tenant saves every month. At a month, tenant will accumulate ,500 in 5 years. (×12×5) Combined with the initial option premium, which can be security deposit, the tenant will have almost ,000 for the down payment. This savings would not be possible if not for lease to own.

Rebuild credit

Many tenants have low credit ratings, and thus won’t be be approved for mortgages, especially these days when banks are cautious with their lending practices. A lease to own term allows the tenant enough time to repair credit in order to be considered for a loan. Also, since the payment history is the most important factor of the credit score, an owner can even provide the service of reporting tenant’s payment history to the credit bureaus. This can be a huge incentive for the tenant to pay rent on time.

Possible seller financing

It is also called an installment sale. The seller can offer the buyer an alternative to bank financing by having them make periodic payments to the seller, just like a rent payment. The installment sale also provides benefits to seller in capital gain tax deferment. The capital gain taxes are partially or fully deferred over the term of the note.

Feel of home ownership

Tenant feels as if he is a homeowner rather than a renter, yet he is not responsible for many expenses that incur to a homeowner such as property tax and hazard insurance.

Continue to Read Lease to Own – Challenges and Considerations (Part II)

Related Tax Lease Articles

The capital allowances for purchasers of equipment have recently changed quite substantially.

For outright purchases made by companies after 1 April 2008 and for sole-traders/partnerships after 6 April 2008, there is an Annual Investment Allowance (AIA) of £50,000. This means thatequipment purchased outright up to a total value of £50,000 during their tax yearcan be claimed against their businesses profits. Anything above this amount during the same tax yearis thensubject to a Writing Down Allowance (WDA) of 20% per annum, and 20% pa on the reducing balance each year thereafter.

This policy changed again in the recent Budget (March 2010) – the major change being thatthe AIA was doubled from 1 April 2010 for companies and from 6 April 2010 for sole-traders/partnerships. This now means that businesses can write offthe first £100,000 of equipment purchases against their profits and then the standard WDA of 20% kicks in thereafter.

Remember however that this is only applicable to the equipment bought outright by the business. If you choose the lease rental option (because you don’t own title to the equipment) you can still ouffset 100% of every monthly rental payment you make. It is really down to your own business structure, cashflow, and operational procedures whether you ultimately choose to buy equipment outright for your business or opt to lease rent it, both have their advantages that should be carefully considered before making your final decision.

More Tax Lease Articles

You might find that there are a number of benefits to leasing a vehicle that apply to commercial business that are not available to a private individual doing the same thing. This will be mostly to do with mileage and you need to be sure that you have a sufficient number to allow you to conduct your business without going over as there are normally stiff penalties for exceeding the mileage allowance. Make sure you read and understand all small print in the agreement document before signing anything, as you don’t want to be locked in to an agreement that does not suit your needs. Buying the company car on the other hand does not have such restrictions, however the company will have be responsible for servicing, road tax, tyres, etc. and these are things which are generally included as part of a lease agreement and which can be expensive. Another point to consider when purchasing is that as soon as you drive off the forecourt, your new car immediately loses value and will continue to lose value for as long as you have it. However, leasing means that your company does not carry that loss. At some point your lease agreement will come to an end and you will have to either cancel it or renew it. Do not renew it automatically as there may be some better deals or more suitable options for you to choose from. Another pro for leasing is that after a few years, you will need to replace or renew your company car anyway and when you lease, it is so much easier to give it back and select a new one. If you have purchased, you will have to sell or trade it in and then find a new one. This is the rationale that most businesses use when choosing to lease cars rather than buy them.

When you are looking to replace your company vehicle, leasing is a very viable option which is worth looking into. Find out about any tax benefits that are available, look for offers where there are inclusive benefits and the opportunity to adjust your mileage allowance, and, think about not having to worry about maintenance, depreciation and replacement.

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• Tax relief – Rentals are 100% allowable against taxable profits (see example below)

• Option to take ownership of / title of proposed products

• Preserve other credit facilities

• No capital expenditure – rentals payable monthly

• Fixed Term (allows effective budgeting)

• Fixed payments

• Ability to add / upgrade products

Leasing vs Outright Purchase – Worked Example
Lease finance is the most effective way to acquire any new equipment as a result of the tax allowances that apply with this type of acquisition. Below is an illustration based on a 3 year lease agreement showing that, once tax relief is taken into account, the total amount paid can be less than buying the equipment outright:

Invoice Value: £10,000
Monthly Rental: £336.00
Total cost of Rentals: £12,096
Tax relief at 20% of Total cost: £2,419.20
Total cost after tax relief: £9,676.80

Lease Rental
Yr 1 – £4,032 (100% of rentals)
Yr 2 – £4,032 (100% of rentals)
Yr 3 – £4,032 (100% of rentals)
_________
Tax Relief Via Leasing: £2,419.20

Outright Purchase
Yr 1 – £4,000 40% of purchase price
Yr 2 – £1,500 25% of reduced value
Yr 3 – £1,125 25% of reduced value
________
Tax Relief Via Purchase: £1,325.00

This is a simple yet useful worked example that demonstrates the typical UK tax relief that is available via taking the leasing route to acquire new equipment for your business, compared to the UK tax relief available on outright purchase. This demonstration is based on the tax percentages currently in place in the United Kingdom and should be used only as an example. You should speak to your accountant to discuss your own personal business circumstances to see which is the most beneficial route for you.

CAR LEASING (CONTRACT HIRE) – TAX AND VAT ADVANTAGES VERSUS HIRE PURCHASE:

1. Contract hire is an operating lease that is, for accounting purposes, classified as “off balance sheet”. The advantage of this is that it improves the debt ratios for a business. However, for hire purchase, even though you won’t own it until the final payment, the vehicle is treated as an asset as soon as you take possession;

2. With car leasing/contract hire the monthly payment can be offset against taxable profits thereby reducing the tax a business pays;

3. With car leasing/contract hire, if the business is VAT registered it can reclaim 100% of the VAT if it is used exclusively for business or 50% on the finance element of the rentals if the vehicle is used privately.

4. With car leasing, if the business is VAT registered it can reclaim 100% of the VAT charged on company vehicle repairs and maintenance so long as the business pays for the work performed on the car.

TAX ADVANTAGES OF HIRE PURCHASE VS CAR LEASING (CONTRACT HIRE):

1. If ownership is a priority (even though the business will not own the vehicle until the final payment after 3 or 4 years) hire purchase is an extremely cost effective method of borrowing;

2. Businesses might be able to claim tax relief on the interest charged across the period of the hire purchase contract;

3. With hire purchase, because the vehicle is classified as an asset, the depreciation of the car can be written off against taxable profits.

It should be noted that businesses cannot claim any VAT relief for the purchase of a car (or via hire purchase) unless the car is used exclusively (100%) for business purposes or if the car is used mainly as a taxi or a car for a driving school. Although, like car leasing, a business can generally recover the VAT on all other business motoring expenses like fleet management or off-street parking. However, there are special rules for reclaiming VAT on road fuel used for business purposes.

More Tax Lease Articles

London, UK (PRWeb UK) March 3, 2011

Recent research suggests that 46% of new car buyers want to buy their car online and have it delivered to their door. Car buyers have expressed a strong desire for a full end to end experience of comparing, shopping, arranging car finance, completing the transaction and getting the car delivered the same as they would for other ecommerce purchases.

Whilst a car is a big purchase, the online risks are substantially reduced for new cars by the combined effects of manufacturer warranties and distance selling regulations that provide between 7 – 14 days ‘cooling off’ during which a car can be returned. Based on this, some experts suggest that car buying over the internet could reach up to 400,000 cars (£5 billion) over the next 10 years.

Figures from a recent Autotrader survey showed that 33% of 5,000 people interviewed are ready to buy cars and vans online whilst Capgemini’s survey of 8,000 consumers “Cars Online 10/11” found that 46% of people were likely or very likely to buy their new car using an end to end online car buying process. Whilst research suggests there is a demand, what are the underlying needs that are pushing online car buying?

Whilst Capgemini’s research suggests the key drivers for online buying are convenience and price, it may come as no surprise that most British car buyers don’t want to haggle. According to research by Sainsbury Finance, two thirds of car shoppers planning to buy a car in the lead up to March 2011 won’t negotiate hard and will most likely settle for the list price. In this context, the appeal of buying on the web is that the online marketplace enables a consumer to anonymously compare and find the best price for a new car without having to negotiate. This tendency to use the web as a buffer is further reinforced by the fact that test driving the vehicle is not a high priority for many online shoppers. They seem more comfortable with independent reviews than they are taking a test drive and Ford Retail confirmed this when they recently stated that 37% of internet shoppers are prepared to buy cars and vans without test drives.

Interestingly, offline buying tendencies are actually more conducive to online car shopping. As much as 80% of all new cars are bought with finance with lenders funding more than 50% of all cars sold by dealers (c. £12 billion) according to the Finance and Leasing Association. Therefore, car buyers should actually shop for the best deal based on a monthly price and not the list price because a low list price doesn’t always equate to a low monthly price. Indeed, often it can be the opposite. A shopper may find a car with a high list price being sold for a low monthly price.

Mark Peatey, Director at Finance A Car, a UK website that provides an end to end solution for new car buyers, stated that, “Whilst online car buying is common in other countries such as France, until recently it has not been easy in the UK. Despite the fact that most people want to know the monthly price, online car price comparison has historically been based on the list price which has little to no variation across dealers. However, because there is the potential for a big variation in monthly prices, UK car shoppers are now using the web to get the most competitive car and finance packages and are saving as much as 50% on their monthly payments by comparing the prices for hire purchase, car leasing and loans”.

About FinanceAcar.co.uk

Finance A Car (http://www.FinanceAcar.co.uk) is a new car and finance specialist. It is the UK’s first car finance marketplace and it enables car buyers to choose their car, compare finance products from multiple sources, apply for finance, buy the car and have it delivered. Users can select their car by monthly budget and compare more than 1,000,000 prices for car leasing, hire purchase and car loans from top UK lenders for more than 6,000 new vehicles.

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©Copyright 1997-

, Vocus PRW Holdings, LLC.
Vocus, PRWeb, and Publicity Wire are trademarks or registered trademarks of Vocus, Inc. or Vocus PRW Holdings, LLC.

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