Today, there is a large flow of cars on the roads. And all because almost every family owns a car. Cars make a person’s life more convenient and comfortable, but not everyone has the financial ability to purchase it. This does not mean that you need to forget about your dream. Of course, you can get a loan, but it is not always that easy. For such cases, there is a special service called “leasing”.
The key concept – car leasing
Car leasing is the rental of a vehicle with the subsequent possibility of repurchase, or the phased acquisition of a car as a property. Leasing is a popular financial instrument in the car market, which allows the buyer to become the full owner of the model they like without having to pay the entire amount at once. The service is great for individuals who want to purchase a car as well as for entrepreneurs and legal entities who need equipment for business.
The leasing procedure is as follows: a person interested in buying a car applies to a leasing company. The company purchases a car that meets the specified parameters and leases it to the client for a certain period, signing the deal in the vehicle leasing software. During the period specified in the contract, the lessee pays the lease payments, and at the end of the period, they fully redeems the car in their ownership. The procedure is very similar to a car loan with its regular payments and the down payment. The difference is that when leasing a car, the car belongs to the company up to a certain point, and with loan, the car immediately passes into the possession of the borrower.
Advantages and disadvantages of car leasing
The reason why car leasing has become widespread today is a number of advantages compared to car loan:
• Car leasing is cheaper than a loan with a monthly payment. And all because leasing companies often buy cars in bulk, which means they can offer it at a lower cost.
• You do not need to do a lot of paperwork to apply. Documents confirming your identity, a driver’s license and a few more certificates from the place of work are enough.
• The registration procedure takes a little time.
• When considering an application for leasing, as a rule, credit history is not taken into account.
• You can buy commercial vehicles, as banks are reluctant to issue loans for trucks and buses.
• A leased car does not increase the client’s tax base, because leasing payments are considered as expenses in accounting documents.
• The lessee has the opportunity to buy or exchange the car for another model. You can even order a car from abroad, and the leasing company will figure out its transportation.
• Property acquired on lease cannot be seized.
• You can also lease used cars or equipment.
Among leasing operations, there are several disadvantages:
• The risk of losing the car in case of delay in payments.
• Payments are mandatory, regardless of the financial status of the lessee.
• Monetary risk in currency fluctuations.
• If your company has existed for less than a year, you may not be able to get a lease since the business might not survive and be able to pay fees.
What do you need to conclude an agreement?
Financial lease implies a more loyal attitude towards the client compared to a bank loan. The bank has clear policies and rules that they follow. With leasing, client orientation is welcomed. Even when approving the terms of leasing payments, the company focuses on the wishes of the lessee. Despite this, people over the age of 25 can conclude a leasing agreement if they have the following documents:
• Passport of a citizen of your country;
• Driver’s license;
• Certificate of official employment or the balance sheet of your company for the last year;
• Business plan;
• Application with requirements regarding transport, technical characteristics, desired price.
The leasing agreement must contain the name and description of the leasing object, the term of transfer, the procedure, schedule and amount of payment, and the provisions for concluding an agreement with third parties.
The procedure for obtaining a vehicle on lease
Select a car. First, you need to have an idea what car you want. To do this, decide on the make, model, condition and technical characteristics of the car.
Search for a leasing company. This is an important part of car leasing, and it should not be neglected. When choosing, pay attention to the financial situation of the company, age, sources of financing, reputation and restrictions on clients and leasing objects. Also, check if the company has auto leasing software.
Verify documents. Prepare a list of documents required by the leasing company. At this stage, agree on the terms of the contract and carefully read all the points. Check with the manager what actions will be considered a violation, discuss insurance.
Sign the agreement. Pay the down payment, get the car and enjoy using it. With the last payment, the lessee receives full ownership of the car.
What to choose: a loan or leasing?
Some people confuse the concept of a car loan and leasing, considering them almost the same services. Which they are not. The leasing procedure has many more advantages compared to a loan. First, leasing companies do not have such strict requirements for their customers as banks. The contract is concluded on more flexible terms: mandatory payments are lower, and the payment schedule is set individually for each client. The terms of financing under leasing are longer than the terms of the loan. As a standard, companies offer a 36-month period, and some have increased it to 5 or even 10 years. Moreover, it is easier to end a leasing contract than a bank one.
Today, leasing is a salvation for those who cannot buy a car quickly and easily. The service consists in the fact that a person rents the car they like, paying mandatory payments for it, and at the end of the established period, they fully redeem the car. However, leasing is not the same as a loan. Banks have established rules for issuing loans and strictly follow them while leasing firms are client-oriented and provide a more flexible contract for the lessee. When choosing a leasing company, pay attention to the service duration, financial statements, reviews on independent resources, the availability of a car leasing software, which business they most often work with, and also ask the company manager for a balance sheet to see where the company takes money to buy a car.
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