What is needed from legal entity to take care in leasing and why is it profitable
About 40% of new cars are leased and not purchased. In the short term, this has several advantages over the purchase. In most cases, you may be able to pay lower monthly fees, modern security technologies, and around-the-clock technical and after-sales service. Formerly, car leasing was limited to several passenger vehicles, but now you can rent any of them: crossovers, trucks, SUVs and trailers.
When the rental finishes, you can leave the car with the lessor, sign several documents and leave. But what if you really like the car and you decide to consider the option of purchasing it?
What is car leasing?
Leasing is a great way to get a car at an affordable price. Down payment and monthly payments are initially lower than the purchase. Car leasing is similar to rental. You also choose a vehicle within an agreed time for a fee. You have complete freedom to choose the brand, model, specifications and mileage. The total rental price is calculated based on several factors: the cost of the car, the annual mileage, the cost of the car at the end of the lease and its duration.
For large and medium businesses, freight transport leasing is a sought-after service. This does not affect the financial stability of the company. Legal entities must first choose a dealer and a leasing company, which is charged with the main costs and the clearance process. After making the advance payment, the transaction is made within a few days and the legal entity gets the vehicle at its disposal.
The main advantages and disadvantages of leasing.
Drivers who prefer to lease a car do this for several reasons. They get the opportunity to drive a new vehicle throughout the entire rental period, which is under warranty. At the same time they get a good ongoing maintenance and service. Monthly payments are always less than buying a new vehicle. This is because rental payments are based on the cost of the vehicle for the rental period, and not on its full value.
But the lease has its drawbacks. Over the long term of the lease, the lessee is spending more money than buying a new car. Therefore, very often they simply buy it at the end of the lease term.
The advantages of leasing:
1. It is cheaper. As a rule, the down payment and monthly payments are much lower when renting a vehicle than buying it. You pay for the use of the car, but not its entire cost.
2. You can drive a good car, truck or SUV. Since maintenance is taken by the lessor, you have an excellent opportunity to increase the comfort and safety of each trip.
3. Modern car functions. Since you rent a new car, with it you get the latest technology and add-ons.
4. Benefits. If you are the owner of a business that rents a vehicle, then you are entitled to tax benefits for renting.
Disadvantages of leasing:
1. Currency risks. If the contract is linked to the exchange rate, then all risks in the case of devaluation are borne by the client. Accordingly, monthly payments may increase if you made out the initial contract in foreign currency. Lessors often do not practice floating rates.
2. Loss of a car. This happens in case the lessee can delay the monthly rental payments.
3. Customs duty. The situation with the payment of customs duties applies to special equipment or trucks.
Leasing for legal entities has several advantages:
· The possibility of influencing monthly payments using prepayments and the purchase price;
· There is no need to create your own fleet;
· A tax arrest cannot be imposed on the leased asset;
· The possibility of updating the fleet every 2-3 years;
· Payment for registration, currency exchange, motor insurance, as well as transport fees remain at the leasing company;
· The leasing company takes over the registration of the object in the relevant state bodies;
· Tax advantages - optimization of income tax;
· Efficiency in the decision of questions concerning leasing;
· Leasing does not affect the increase in debt, so the company does not lose its investment attractiveness;
· Registration of leasing without a down payment;
· Leasing without assessing the financial condition;
· High level of service and constant monitoring;
· Cost-effective transparency and favorable terms;
· There is no need to execute a pledge agreement and notarial services;
· No registration dependency;
· The possibility of planning a expenses
The process and conditions of leasing.
The conditions are quite simple. You rent a car from the owner - a leasing company - and are responsible for his condition until the end of the lease term. To start, you make a deposit (initial deposit), which is usually equivalent to several monthly payments. Then every month you deposit a fixed amount to the account of the lessor. The longer the lease term - the lower the monthly payments are received.
A couple of months before the lease expires, the lessor usually contacts you to offer a rental of another vehicle or, at the end of the rental period, the vehicle is returned to the lessor and checked. Then you can rent another vehicle.
It is always a bit more difficult to calculate the cost of renting a car than buying it, so you should deal with the basic terms together with the dealer or trust the lessor.
The most common ones are:
· Retail price (full price of a new car);
· Rental price;
· Residual value (base value at the end of the lease term);
· Depreciation (the difference between the value of the new vehicle and its residual value);
· Mileage rate;
· Rental duration;
· Advance payments;
· Additional fees and penalties.
Leasing objects for legal entities.
· New cars;
· Cars for transportation;
How to arrange leasing to a legal entity?
Making a car lease is much easier than buying it. But to get the best deal, you should consider a few points:
1. Select the type of car. You need to focus on the goals for which you purchase a car. This may be a convertible, sedan, station wagon or SUV.
2. Select a model. Make a list of models that are best suited in the price range. Thus, you can reduce costs that are not related to renting by choosing models with good mileage, high reliability, low insurance premiums and better safety features.
3. Spend a test drive. As soon as you narrow your choice to several main models, it’s worth a test drive of each of them to choose the right one. Particular attention should be paid to comfort, braking and safety systems, internal noise, visibility, shock absorption and steering.
4. Take care of vehicle safety.
5. Compare different offers for leasing.
6. Agree on the price. It is worth discussing the price immediately. Many people who rent a car are not aware that their monthly payments will be based on the final agreed price.
7. Pay the rent. The larger your down payment will be, the lower the monthly installments.
Reasons to buy a car on lease.
Purchase price below market value.
Estimate the cost of the car in 2-3 years is hardly possible. The residual value that the leasing company calls for orientation is to determine the monthly payment. Usually this is the selling price of a new car minus the residual value, which is divided by the number of months of leasing and equals the monthly payment. If the leasing company makes mistakes and sets a too high residual value, then the monthly payments will be much lower. If the residual value is too low, then you will most likely be able to buy a car for less than what it will cost at the end of the rental. Often, leasing companies negotiate the price of buying a car that will be beneficial to you.
The car is in excellent condition.
While you rented a car, it was in good condition. You managed it responsibly, maintained its current state and constantly carried out inspections and maintenance. As a result, buying a car is quite reasonable and reasonable step.
The leasing company estimated the cost of the car at the end of the lease term, indicating the residual value. Estimation of the residual value includes a limit on the number of kilometers that the car can travel. This means that if you exceed this amount, then each additional kilometer will be charged separately.
To avoid the hassle of buying a new car.
Buying a new car takes a lot of time and energy. Buying a rented car can save a few days. You still have to first look for the leasing company and the necessary car, but this company usually deals with all legal issues and documents on the purchase.
Should I buy a car after leasing?
Before you buy a car after the end of the lease term, answer a couple of questions:
Is the residual amount right for you?
Find the lease and the remaining amount. It can also be considered the sum of the ransom. After you get it - look at the average retail, retail and private market value of the rented car. If your redemption amount is less than or close to the private price, then the purchase should not be postponed.
Is the car in good condition?
One of the advantages of leasing is that the car for the entire rental period is under warranty. But when you buy it back, the warranty period expires. This usually happens after three years. Therefore, consider the possibility of checking your car and providing it with a full technical inspection before purchasing.
Will the ransom fit your budget?
If you buy a car and the down payment is low, then most likely the monthly payments will be high. Therefore, it is immediately worth estimating the monthly interest rate.
How to pay for a car?
If you decide to buy a car after leasing, this can be done with or without the dealer.
Conditions for buying a car on lease.
· Validity period - from 1 to 5 years;
· Advance payment - 30% of the value of the object;
· Partial compensation of the value of the leased object;
· Insurance for the entire rental period;
· Commission of the leasing company;
· The possibility of long-term repayment of lease payments and the transfer of ownership of the object at an early stage;
· Monthly repayment of leasing payments;
· Registration of the object in the relevant state bodies.
What documents are required for registration of the contract?
· Official application signed by the head of the company;
· A copy of the current charter of the enterprise;
· Questionnaire for the purchase operation;
· Company balance sheet and financial report;
· A copy of the passport of the head of the company;
· A copy of the tax certificate;
· Certificate of accounts in banks;
· A copy of the protocol on the appointment of the head of the organization.
For many companies, car leasing is a great opportunity to avoid problems with the fleet. But if you want to buy a car after leasing, then you should look at his condition and choose the most successful deal.