When most people think about getting a car, they automatically think about buying. It is easy to see why. For decades, most people have been content to buy cars, knowing that while they may lose value quickly when used, they remain useful for years or even decades into the future. Classic cars are popular collector’s items among the well-to-do, and many people who love their cars keep them until they cannot run, or even past that.

But the emotional attachment to a car may cloud a person’s best financial interest. All too often it is better for a person, and almost always for a company, to rent a vehicle instead of owning it. This is due to a number of reasons concerning upkeep, value and maintenance, since cars do an incredible amount of work and are filled with a large number of parts which can break and render the car unusable. As such, many business professionals, and those who will use a car extremely heavily, have shifted to contract cars instead of purchased vehicles.

The biggest reason that people and companies switch to contract cars is the fact that cars lose their value extremely rapidly. With the exception of certain classic cars and racing vehicles, cars generally lose 80%-90% of their value between the time they are purchased and their final sale. In fact, a car’s worst day, in terms of value, is the day which it is driven off the lot, because the car loses 50% of its value the moment it is sold. The reasoning behind this is obvious: a car can have any one of millions of expensive but intractable problems that render the car useless. Someone who purchases a car and then needs to immediately resell it probably has discovered, or caused, a fatal flaw. The same is true for cars that have only been lightly used; most buyers will presume that there is something wrong with them and refuse to pay what they might when purchasing a new vehicle.

This loss of value is a real problem for a person or company that needs to turn over their car on a regular basis, since the new vehicle is almost always paid largely by the sale of the old vehicle. By switching to a contract car, this problem is avoided, since the car is effectively ‘rented’ instead of owned. The company or person who is using the car never has any financial investment in it, and if the car has some fatal flaw or is horribly worn from use then it is the company that is contracting it out that ends up suffering the financial blow.

This leads to the next major reason that people contract a car instead of purchasing it, and that is the fact that cars wear out. While the average consumer is not too concerned if their paint is scratched or the seats have begun to sag, this can be a real problem for a company whose image is dependent on the appearance of the car. Shuttle and chauffeur services routinely contract out vehicles, as do companies who need their executives to travel in style and impress clients upon their arrival. By contracting out new cars and then handing them back to the company when they begin to wear, it is possible for a company or person to always be seen driving a new car, without the financial expense of constantly purchasing one.

Newer vehicles are also much more reliable than older ones, a product of the simple fact that no car can last forever and over time its components will eventually break. This makes contract cars ideal for people who need access to a vehicle which will always start and which will not break down on long trips or under heavy use. As previously mentioned, many shuttle and chauffeur companies make good use of contract cars so that they can always have access to new vehicles, but the benefits are not merely cosmetic. An inopportune breakdown could have disastrous financial consequences for a company, especially if the passenger ends up being late for a meeting or missing their flight because of the problem. This also extends to company cars used by some corporations, since they serve as a key way to get important personnel around the country in safety and comfort.

While contract vehicles may be more expensive per month than vehicles purchased on a loan, they offer many advantages to those for whom high turnover and ‘newness’ are more important than keeping the car for years. Companies and persons who use their cars hard or need them to be unquestionably reliable can easily find the benefits of contract vehicles.

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Category: Automotive
Keywords: cars, leasing, contract