Leasing Definition, Variants – Credit or Leasing?
What exactly is meant by leasing
Leasing is a special form of renting an item. The agreement between the manufacturer and the customer is referred to as direct leasing, while indirect leasing is the contract with a leasing company. This type of rental includes a specific timeframe in which the lessee uses the item for a fixed, usually monthly, lease payment.
Is the time frame mandatory?
The term is at least one year. Usually, especially in the automotive sector, three years are to be calculated. After this time, the final installment is due. Various models are submitted to the customer. When the object is returned, the seller splits the closing rate in monthly installments. A down payment ensures lower rates. The lease agreement is similar to the installment plan, however, the buyer only tenant is not an owner.
The simplest solution is to pay the final installment at once; However, not every lessee can realize that. Special payments during the term are possible at any time, the final rate is reduced accordingly.
Where and how does this solution work?
The most common type is car leasing. At this point it should be noted that there is the possibility to extend the corresponding contract. Now new leasing rates are determined, which of course are lower. The vehicle will normally be returned to the dealer at the end of the term if the customer wants to lease another vehicle. The dealer will carefully inspect the vehicle and document the condition of the car.
If the condition does not meet the expectations of the dealer, the customer must pay the depreciation. It is worth noting that in the motor vehicle sector a full comprehensive insurance is required by the lessor. In the commercial sector, industrial machinery is also acquired on the basis of this financing.
The following items are preferably leased and subsequently purchased:
• production facilities,
• IT facilities,
• Commercial vehicles,
• printing and also construction machinery,
Real estate is even being acquired with this payment procedure.
What is the procedure?
Account must be taken of the duration and the amount of the final installment. If the leased item is not taken over, the installments are to be calculated as user fees or rent, so to speak. The options to extend the contract or to handle the final installment as credit are granted to the buyer. From this point on the buyer is the owner of the property.
The industrial entrepreneur is able to avoid high investment and still use modern, profitable machinery. As a rule, computers, printers are generally leased. Businesses see benefits in this category as they use new, more up-to-date equipment that ultimately benefits the business.
Business people prefer this type of acquisition because of the tax advantages that are taken into account as business expenses. Of course, interest rate changes or other influences are not relevant. The installment payments do not reduce working capital and are calculated on an appropriate scale.
The free decision is up to the customer, return or purchase. In addition, the customer is able to profitably use commercial vehicles, machinery and equipment and to purchase more modern objects after the end of the term.
The consumer prefers buying a car through leasing advantages
The focus for the consumer is on car purchases. The guidelines are consistent and differ only in specific points related to the object in question. Your own assets are not used or there is no assets available. The financial scope is considerable; Financial planning is based on reality. The term and the rate are clear from the outset, so that the customer can accurately calculate taking these aspects into account.
The car buyer has the modern chic car, without having to pay enormous costs. After completion of the term modern cars can be used, the payment of which is handled the same way. The purchase of company cars is worthwhile in any case in this area. The rule of thumb is that the more comfortable and expensive the vehicle, the more likely it is to lease finance.
Advantages briefly summarized
• The financial planning can be realized exactly due to the fixed and usually low rates,
• the long maturities provide flexibility
• the customer buys the latest models in the field of car purchase after the end of the term,
• Repairs are carried out by the lessor; However, the customer must make sure that a clause in the contract is set.
• Modern technical devices are used.
• The costs for hardware, software and service in the IT area are obvious; In addition, the latest technology is used.
• Own cash resources remain untouched.
• In a comparison, the costs equate to benefits, with the benefits in the commercial sector being much more profitable.
It is advisable to conclude a maintenance contract so that no sudden burdens go beyond the budget. The warranty period is often longer than the term.
The contract is non-terminable. The installments are to be treated as fixed costs. In the automotive industry, only the authorized workshop is responsible for the necessary maintenance and repairs. The eligible item is either purchased or returned to the lessor. The paid installments are to be calculated in this case as rent. There is no refund. If the buyer can no longer pay the installments for different reasons, the leased item is withdrawn; usually claims for damages are asserted.
If a third person wants to take over the lease, that is an elegant solution, but unfortunately not always feasible. Warranty and warranties can be problematic. In some cases, the contracts include services that the customer does not need or desires. In the event of a financial shortage, the leased property can not be sold or sold.
What is more advantageous – credit or leasing
In principle, leasing, cash or credit can not be considered more appropriate, the buyer or company has different financial options. The decision is made individually.
Disadvantages briefly summarized
• The objects are not the property of the buyer,
• the return may cause problems
• the contract can not be terminated prematurely,
• scratches, dents or non-adherence to maintenance dates lead to additional costs,
• the car contract does not allow tuning or serious modifications to the vehicle,
• Free choice of workshop is excluded.
Some tips for leasing
The longer the term, the cheaper the monthly installments. The leasing offers have to be compared, on the Internet this possibility exists through comparison portals. The costs vary and are calculated differently by each provider. When leasing a car, attention must be given to the care of the vehicle and compliance with the required maintenance. Wear parts should be checked and replaced if necessary. The preparation of the returned car makes sense.
The prepared car illustrates the care and careful handling of the vehicle. Smaller smears are, according to experience, rather “overlooked”. The return of the leased items often causes frustration of the buyer. The objects are meticulously examined for blemishes and depreciations. If the return of the leased property has occurred and an inordinately exorbitant recovery is claimed, an objection may be filed. In this case, the lessee can try to sell the car privately himself. Traces of use are normal and must not be counted.
It is important to ensure that no mileage limit is specified in the contract. Those who have too many kilometers on the clock will also have to pay mercilessly. The estimated kilometers, if a mileage limit is required, must correspond to reality; It is better to agree on a higher mileage.
Leasing increases the attractiveness
Statistics explain the overall picture with numbers. In 2018, 69.7 billion euros were invested in this area; this represents an increase of 4.5% compared to the previous year. 1.9 million new contracts present the advantages of this type of financing.
Some numbers explain the difference between cash and leasing:
The car costs 30,000 euros, which are paid in cash. The loan financing is calculated with 6,000 euro deposit and installments. A current offer with a leasing rate of 32 euros per month is worth mentioning. The term is 24 months, the mileage limit is calculated at 10,000 km per year. A deposit is required. Longer runtimes can be selected.
However, 949 euros are payable at takeover. In order to win customers or to keep the circle of customers, attractive offers are presented. The financing option described is perfect and provides financial freedom. Such a low monthly rate is barely noticeable and helps to a new car.
These considerations are the customer. Comparison portals provide additional information that presents this financing option to the customer. Every consumer is referred to this option in the media.
Tips for the successful return
The look is important, who brings a dirty and neglected vehicle to return, from the outset for a negative impression.
Some tips are also to be considered in this area:
• The car should be clean and well maintained, professional preparation is not necessary, but the look should be appealing.
• The maintenance deadlines must be adhered to without any gaps, the proof of which must be presented at the time of return.
• It makes sense to photograph the car with any damage or dents in order to be able to confirm your own statement if necessary. If the car has no defects, a photographic proof is still appropriate. If you are not afraid of the costs, you can have an independent report prepared beforehand.
• It makes sense to be present in person while checking the car. The protocol should be checked promptly before submission of the signature.
• In the case of unjustified cost calculations, an objection must be lodged. Minor signs of wear and signs of wear are acceptable.
The redemption is often no problem, but the hedge makes sense. Under certain circumstances, a simple return can be very expensive.