Just a couple of decades ago a few Ukrainians knew the meaning of the word «leasing». Today this type of financial services though slowly but surely becomes a worthy alternative to the well-known crediting. Slowly, because for many people the activity of leasing companies is still an unfamiliar segment of the financial market. Surely, because it has a number of advantages over its older “brother”.
What is car leasing in simple words
In short, leasing is the long-term lease of a car or other movable or immovable property with the right to buy it back. The following example gives a more detailed, but very accessible explanation of the meaning of the term.
You urgently need a car, but do not have the money to purchase it. You find a seller with a car suitable for you, contact the leasing company and become its client. After signing the contract, the lessor:
- buy the vehicle you want with your own money;
- makes the registration of the object (registers, registers, pays the insurance, etc.).
In fact, the leasing company becomes the owner of the car. Immediately after all these procedures (and they take only a couple of days) and the payment of the initial fee, the lessor hands over the leasing object to the client for use. The client pays the expenses of the leasing company according to the terms of the agreement.
At the end of the contract period (which usually coincides with the time of full repayment) the transaction is considered to be completed. The lessee becomes the rightful owner of the car. Of course, the debt includes not only the nominal value of the car, but also all the costs incurred by the lessor, as well as payment for his services.
Leasing or a car loan – which is more profitable?
Both financial operations have their “pluses” and “minuses”. In one situation a client will be more suitable for a car loan, in another – a car leasing. You just need to compare the financial parameters of each operation, and then make your choice. Although, to be fair, it should be noted that more and more entrepreneurs, companies and individuals give preference to the leasing agreement due to its following advantages over the loan:
- no need to make monthly deductions to the Pension Fund, pay every year for insurance and maintenance (all this is already included in the monthly leasing payments);
- convenient for the client schedule of payments with the possibility of its correction;
- impossibility of seizure and confiscation;
- longer repayment terms than a loan;
- longer repayment periods than the loan;
- possibility of obtaining a discount from the supplier;
- lower down payment and interest rates;
- the possibility to return the object of leasing to the company at the end of the contract.
The advantage of leasing a car is the absence of paperwork. The registration of the deal is much faster.
How does leasing differ from a loan?
The main difference between these financial transactions is that when leasing, the customer gets a specific property, while the loan gets cash. If you are interested in leasing a car, we are waiting for you at TEKOM-Lease.