The financial condition of the majority of Ukrainians is such that very small percent of our compatriots can come to the showroom, pay at once the whole sum of money even for the used car, not to mention the brand-new four-wheeled friend. Slightly more people can afford to buy a car, using a loan from a bank or installment plan.
But it does not mean that one should bid farewell to the dream of private car purchase finally and irrevocably. Not so long ago a new possibility to become an owner of a car even a person with a low income appeared in Ukraine. It is called leasing, which means the lease of property with the right of its purchase.
Growth of interest to car leasing in Ukraine
First of all it is explained by much more loyalty of the lessors than of the banks. Whereas the banks are more loyal than the banks, and are unlikely to deviate from their regulations, the lessors often have an “individual approach”. Even a good credit history can be an excuse for a reduced rate. The lessee’s wishes are taken into account in the leasing repayment schedule.
Therefore, working with the leasing company, you can purchase a car on much more favorable terms than in the case of a bank loan. But as in any other case connected with finances, you can’t avoid fraud here as well. Therefore, if you are offered too loyal terms, you should not let your guard down.
From the bank auto loan “scare” clients most of all their careful filtering. Any “blunders” in the credit history are usually the reason for refusal. In addition, interest rates continue to be high and the borrower’s initial costs are burdensome:
- fee to the Pension Fund;
- payment of the registration fee for the purchased vehicle;
- motor vehicle hull insurance
All of these factors can be a serious challenge for the buyer of a car with the money borrowed from the bank. So they look for a more suitable alternative and often find it in financial leasing. Both legal entities and individuals can become clients of the leasing company.
Everyone who has at least some relation to the Ukrainian market of cars, unanimously declare that the demand for leasing is gaining momentum. It is especially noticeable after a certain lull which was observed during consideration by the government of the law about excises on used cars. Many had a hope that its adoption would to some extent touch the new cars in terms of price decrease.
But alas, the miracle did not happen. Little by little, the market began to revive again. The demand for cars was restored, the number of leasing contracts is growing. Stabilization of USD exchange rate, decrease of amplitude of “pendulum” observed in the cost of cars also contributed to it to some extent. It is noticed the revival of individuals searching for leasing companies ready to work with them.
Demand breeds supply. The number of leasing companies has begun and continues to grow rapidly. Even some banks have begun to open branches to provide auto leasing services. This is promoted by its advantages over credit. The main one is the greater accessibility of leasing to customers in today’s environment, which is reflected in less stringent requirements for assessing their solvency.
Requirements at leasing companies
The explanation for the fact that leasing companies have lower solvency requirements than banks is very simple. After the car is handed over to the client, he only becomes a lessee, not the owner of the vehicle. The title to the leased vehicle belongs to the lessor. The client gets them only after the leasing debt is fully repaid.
With a loan it is a different story. The bank client becomes the owner of the vehicle immediately after making the down payment. The car plays the role of pledged property until loan repayment. If problems arise, for example, with making monthly payments, it is much easier for the leasing company to take the car from the lessee than for the bank from its client. Termination of the contractual relationship with the lessee can also occur in the case of:
- failure to pass the technical inspection within the terms specified by the leasing company;
- exceeding the established limit of annual mileage and a number of other reasons.
Why are the conditions for leasing a car so harsh? Because at the end of the contract the client can refuse to buy the car, and simply return it to the leasing company. But after an excessively intensive exploitation the vehicle will lose its marketable condition or will be completely unusable. And still, in spite of the above-stated moments, advantages of long-term lease before a bank credit are still numerous. In any case, those who want to get a car quickly at minimal cost will feel it. The registration of the vehicle implies:
- vehicle registration with the appropriate authorities;
- car insurance;
- payment of the fee to the Pension Fund.
These costs are sometimes as high as 10% of the value of the car itself. The bank’s borrower has to pay the entire amount at once. In the case of leasing, these costs are spread over time. They are included in the monthly payments in installments. Leasing can be unprofitable only if the payments include expenses for seasonal tire changes, car maintenance and other such manipulations with the car. But under such conditions leasing is usually provided to legal entities.
Financial terms of car leasing
An interesting nuance in this question is that leasing is now the only possible way to get currency financing for car purchase in Ukraine. It is forbidden to do it in banks. If you are lucky you can get a good saving in the interest rate. Although this is a double-edged sword: possible exchange rate risks are laid upon the buyer.
Many people do not risk mixing up with foreign currency leasing as they know how the dollar value in hryvnias once went up by three times. But there are those who are ready to take risks for the sake of possible interest savings. There are the companies, which give a car for leasing at 8%, if it is a currency, while the interest rate in hryvnias makes from 15 to 22% with a right of quarterly revision. Other financial conditions for leasing a car, as a rule, are:
- making the first payment in the amount of 30% of the total cost;
- conclusion of an agreement for 12-60 months;
- hryvnia-denominated financing rate from 15 to 22%
But taking into account the individual approach of lessors to clients, these indications may change. If the lessee is unreliable (if the company considers him to be such) the rate and the first installment may be increased, and the term of the contract shortened. If, however, credit history is clean, you can hope for a loyal attitude. In banks, on the other hand:
- first, the financial conditions are the same for everyone;
- secondly, with a bad credit history, the potential client is usually refused a loan.
However, a good reputation alone may not be enough to get significant savings. A good lever could be participation in a leasing partner program. But on the Ukrainian market there are still very few of them.
The subtleties of the leasing agreement
The increase in the number of people, willing to get a car in leasing due to the desire to save money, caused the appearance of a large number of swindlers in this market. Often there are stories on profile forums on the Internet about how pseudo-leasing companies “cheat on money” of people who trusted them.
Individuals who are poorly versed in legal casework are particularly affected. And in most cases these people act so “competently” that from the legal point of view it is almost impossible to find a clue. Here it all comes down to the contract, the ability to properly understand what you sign.
Here is an example to illustrate this point. You have read an advertisement in a network that a certain leasing company provides an opportunity to buy a new car worth 10 or even 30 percent less than the price of the same brand from the official dealer. Such an offer alone should scare away a potential buyer. In fact the price actions are not within the competence of leasing companies.
If someone takes the bait and applies to pseudo-leasing company, the following usually happens. The client is promised that he will get the car within a week on condition of an advance payment of 10-50 thousand hryvnias. Anticipating an opportunity to drive a brand new car almost tomorrow, the client:
- loses his vigilance;
- signs the contract without understanding its contents;
- makes a prepayment.
A week goes by, another week, another week, but not a peep from the desired vehicle. When the distressed buyer starts ringing the bell, it turns out that the contract he signed was not a leasing contract, but a contract for advice on how to choose a car. The cost of consulting services is 10 (20, 30, 40, 50 thousand) hryvnias.
Formally there is nothing to find fault with: the agreement is signed, the service is rendered. And the person is left without a car, and without money, because he willingly signed discriminating norms, being in his right mind.
7 simple steps on how to choose a leasing company
If you have decided to buy a car leasing in order not to become a victim of fraudsters, you should follow the following step-by-step instructions:
- Ask the manager of the company providing leasing services for a certificate or at least a copy of its inclusion in the register of the National Commission on Financial Services.
- Carefully read the agreement on the terms of leasing a car (it must be printed in a legible normal font). It is better to involve a competent lawyer to study the document.
Examine the agreement between the leasing company and the dealer for the delivery of the leasing object. Ask to be included as a third party.
- Check all documents, information about the company personally. Pay attention to negative, not positive, reviews about it on the Internet. Do not contact leasing brokers.
- Ask for the lessor’s details and check it against public databases. If the company acts as a defendant in many lawsuits – you should not contact it.
- Before signing an agreement, check its contents against the one you have previously studied.
Do not make an advance payment before you receive the originals of all contracts. They must be signed by an authorized signatory of the company.