Increasing alternative to purchase of car – operating lease AINA



The growth of new car sales in Lithuania is one of the fastest in the entire European Union. Approximately every second private car is purchased by leasing (with or without payout) and even about 90%. all business entities opt for leasing or operating lease. What are the differences between these alternatives?

Residual value is an essential criterion

When buying a car two choices are available: pay the full amount immediately or distribute contributions over a certain period, for example 5 years. Many buyers choose the last way – it is much more convenient to pay a fixed amount of several hundred euros per month than to say goodbye to a dozen or more tens of thousands.

When purchasing a car on installment (leasing), the initial payment is usually paid with at least 10%. value. So if it costs 20 thousand. two thousand have to be paid immediately. Depending on the brand, model and type, the planned mileage and the customer's wish to pay the lowest monthly fee, he can be given a residual value (the estimated cost of the car at the end of the contract) – it usually varies from 20 to 40 percent for a period of 5 years. If the seller wants 30% the residual value (in our case 6 thousand euros), in only 5 years you only have to pay 12 thousand and interest. They have been very small in recent years, making it even more attractive to buy a car for leasing.

After 5 years you can choose to pay the sales value to the seller (either by signing a new lease) or continue to use the car or leave it to the seller and buy a new one. The main advantage of this purchase is that you do not have to worry about selling yourself and you have to worry about a possible higher than expected depreciation. This risk is borne by the seller.

Some models of brands and / or modifications are more popular on the secondary market, so new car dealers are often determined to give them a higher residual value than the "market standard" value – so the monthly premium for a car may not differ much from the cheaper. Some functions, such as four-wheel drive, an automatic gearbox (especially attractive when combined) also offer added value that can reach 5 percent. and more compared to the 2WD gearbox and manual gearbox models. In the secondary market such cars are also sold faster because they have, until now, less choice.

It is no secret that sellers give a residual value with a margin of less than an implicit sale price. This protects against the potential for future declining value or long sales process. Since the actual value of a car after 5 years is higher than you have offered, you can redeem it and sell it yourself – you deserve more.

Benefits for companies

Companies can lease or hire a company. A difference between them is the principle: leasing can be used by both natural and legal persons, operating lease – only legal persons and people who work according to the individual activity certificate.

Leasing usually only covers the payment for a car, and maintenance, insurance and other costs are extra costs. In principle, operating leases can also be a payment for a car, but often this also includes additional services (insurance, maintenance, tires, etc.). The advantages of each mode are individual and different in different ways. However, both small and dozens of fleet companies are increasingly opting for an operational lease service – cost savings, simpler accounting. When a vehicle is rented, it does not have to be included in the long-term asset inventory (balance sheet) to calculate the depreciation. In this case the company can concentrate on its core activities and does not care about transport. In Lithuania, more than half of large companies and about a fifth of small businesses use operating lease services.

For natural persons, these are not relevant matters, but companies save a lot of costs.

There are car manufacturers, such as Volvo, who already offer similar operational leases to private individuals. Admittedly, not yet in Lithuania.

Financially useful and no headache

When comparing monthly payments, it is often wrongly concluded that operational leases are more expensive than leasing. For example, the premiums for the most popular Suzuki Vitara 4 × 4 leasing for 5 years would be around € 160 a month (10% or about € 1700 to pay, increase the value of the car and 40% of the residual value at the end of the calculate rental period). In the case of operating leases of "Blick" this would be very similar, but with the addition of extra rental services (insurance, maintenance, repairs, tires, etc.) The total contribution would be around € 100 with the value added tax ( VAT). Companies can deduct VAT from the maintenance costs, so the actual costs are around 240 euros per month.

Why is this amount so large when comparing bank leasing and operating lease offers? Buyers do not always appreciate all components: maintenance costs a few hundred euros per year, one seasonal tire set – several hundred more, and civil liability and cascade bans usually cost 20-25 percent. monthly lease payments.

"When assessing the TCO Total cost of ownership "All car rental costs"), operating lease agreements with maintenance usually cost no more than financial leasing (or lease without service) and all services are bought separately. However, buying individually for the customer means unnecessary headaches and in reality extra administrative costs, which he often does not count. For example, after a 5-year cycle of monthly lease payments, plus the costs of insurance, tires, maintenance and minor repairs, including the replacement of windshield wipers, unexpected light bulbs and everything to be divided by the number of months of leasing or rental, you will receive an amount that it can be unpleasant to surprise, "says Algimantas Andrasiūnas, head of car rental company SIXT Lietuva, and adds: – It should be noted that, in the case of operating leases, your monthly expenses will not change throughout the period and the leasing company's contracts provide for the conversion of the contribution by modifying the EURIBOR. Now EURIBOR interest rates are 0 percent, but they can increase after half a year and a change in two to three years, at least five, it is not possible, the same applies to insurance companies, service and other goods and services – the trend of price increases is the elope years observed. In the case of operating leases, this risk is borne by the lessor. Knowing the exact contribution for the next 5 years can make the budget of your company considerably easier. "

Representatives of voice companies who use car rental services also emphasize that the main advantage of operating lease is the constant monthly installment over the term of the contract, no obligations for banks and more flexible and faster document management.


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