Disagree brother in law had a connect dented wing and side door repair cost was 1800 quid this was added to the ballon payment
Darran
so did he pay it and keep the van?or hand it back?
Doesn’t make sense having a balloon payment and paying for damages?
The balloon payment is to take the vehicle away and essentially buy it off the leasing company. They won’t care how damaged it is, aslong as they get there balloon.
Sorry, this is incorrect.
The balloon payment is there to reduce the monthly payment to make it more affordable. So what the finance house is trying to do is lease the vehicle ensuring that the lease covers the depreciation of that vehicle over the period of the lease and their profit. The balloon payment is usually what they see the value of the van being worth at the end of the contract.
If you damage it in any way then the van isn't worth what they have valued it at in good condition - hence the additional charges.
Spruce that can’t be the way dazmonds contract is laid out surely?
At the end of his contract He has the option to either hand it back and start again...... or pay the balloon and keep the vehicle.
If daz opts to pay the balloon fee of 7000 for a 5 year old vehicle (when they have been getting monthly payments already to cover the cost of the vehicle ) and keep the vehicle, they won’t even want to bring daz back into the office, it will be agreed over the phone what he wants to do, and payment taken? .......... surely?
I should have clarified that comment a little more. In essence you are right and I was a little 'blunt' in my response. Sorry. But there are always buts.
I don't know what contract Daz has got, but if he has a contract on the lines of a PCP then he could just pay off the £7000 balance (probably + VAT) and have the vehicle registered into his name without issue. It sounds very much like an HP in disguise where they sell the van to DAZ at the end of the day for the final payment. It won't be a true lease as the only way he could extend the lease would be via a peppercorn rental. In this case he would pay off the £7000 + VAT but continue to 'lease' the van for a minimal amount each year. The van never becomes his.
But each deal depends on how the 'lease' is stacked up. This is why anyone going into financing a van must be so careful what he is getting into and more importantly, how he is getting out of it at the end of the contract.
Finance law states that if a person or company
lease a vehicle they aren't allowed to own it at the end of the contract. The only time they can is if the van is on HP as the vehicle is registered into the owners name rather than the finance house's name.
And this is where the problem begins. Finance houses try to dress up finance deals with all sorts of fancy titles. Unfortunately for Joe Bloggs, 2 finance houses can call their contract by the same name and yet have 2 different end results.
The op says he has spoken to Vanarama and was told of 2 forms of leasing, contract hire and finance lease. In both cases the van is registered in the finance houses name.
The difference between the two options is how the risk is played out at the end of the contract. With CH (Contract Hire) the finance house takes the risk and you lease (rent) the van from them for the agreed period of time and mileage. Any issues at the end of the contract, ie; the van is over mileage or has damage, then they will bill you. The bill isn't in your favour.
With Finance lease you take the risk at the end of the day. To reduce your payment you will find the balloon payment or final payment is what they hope the vehicle is worth at the end of the day. But they don't particularly care. Its your problem as you took on the risk.
If you are a builder the finance house generally refuses to have a balloon payment at the end of the contract as the van is usually so badly treated its not worth much. They do that to protect themselves.
But if you have a final payment its then your problem to sell the van. Yes, all the finance house is interested in is completeing the deal. So in Daz's case they want £7000 + VAT from him. Is his van going to be worth £7000 + VAT in 5 years? I doubt it, even in pristine condition. (I don't know how they arrive at this figure tbh as it means his van hasn't depreciated at the same rate as every one else's van has.) But Daz has to suffer the loss, either directly or indirectly. He wants to keep his van, so will he be paying £7000 + VAT for a van that's only worth say £5000 + VAT. (However this also depends on how he looks at the whole deal. Yes he has a vehicle that is say £2000 over priced, but he did indirectly benefit by having lower monthly repayments because of this high balloon payment.)
If Daz decides to hand the van back with the keys (if there is this option) then the finance house will want its £7000. As the value probably won't be in the vehicle the finance house will start to find ways to raise the short fall. Hence Darran's comment about his BIL's experience. Its what's in the small print.
The other issue with these contracts is how the vehicle is to be registered at the end of the contract. If this is a true finance lease then Daz won't be able to register his van in 5 years time in the same name as the contract was under. Often the van would have to be registered in a family members name or to your personal name if the contract was in a business name. If they insist that Daz registers the van in his girls friends name, how will he finance the outstanding £7000 + VAT?
The other thing is that as leasing is aimed at VAT registered business, you will pay VAT on the interest element of the deal. If you are VAT registered it doesn't matter as you claim it back, but it means added expense for us non VAT registered sole traders. He also found out that they bill him VAT on RFL.
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