Expanding the company’s activities or making a decision to renew the existing car fleet, urgent becomes question on purchase of the car. Purchase the cars by investing free financial resources? Use banks’ offered financial lease? Maybe decide in favour of operating car lease? In choosing operating car lease, you must additionally decide – perform purchase with or without car operation-related services, such as insurance (OCTA, KASKO), technical inspection and payment of taxes and duties provided for in the country, regular maintenance, purchase and change of tyres, etc.
Investing free assets in purchase of new cars is a decision rare companies make nowadays. Most often one of financing types is chosen. By using financial, operating or full service car lease, you will receive the purchased car straight away and pay in instalments – monthly according to the concluded agreement.
Financial car lease
Financial lease is a service most often provided by banks and specialized leasing companies, which often are companies related to car dealers. Financial lease agreement provides that the customer pays the full value of the car within a stipulated period. After expiry of the agreement, lessee (customer) becomes the owner of the car.
What are advantages of financial lease?
+ possibility to choose both new and used cars;
+ financially beneficial, if very high mileage is planned and car is intended to be operated a long time.
Financial lease weaknesses:
- higher monthly lease payment, compared to other financing types;
- non-transparent costs – all car operation-related services (insurance, maintenance, tyres, etc.) are purchased separately;
- car comes into the property of the lessee and must be sold, which requires additional time and financial resources;
- cars are registered as the company’s fixed asset, and costs are reflected in the company’s balance sheet.
Operating car lease
Operating lease, or car lease is a type of financing providing that during operation of the agreement (usually 2-5 years) customer pays the lease fee. Monthly payments are affected by such factors as initial value of the car, amount of the first deposit, interest rate and the remaining value in the end of the lease period. After expiry of the agreement, customer – lessee – hands the car over to the lessor. This type of financing is usually chosen by companies, who want to renew the car fleet regularly.
By concluding the operating car lease agreement, lease period and total mileage of the car during the lease period are stipulated.
What are operating lease advantages?
+ monthly operating lease payment is lower than in case of financial lease;
+ car fleet is regularly renewed, which allows using new cars having manufacturer’s warranty during the whole period of use for provision for the company’s activities;
+ both new and used cars can be chosen;
+ remaining value of the car is known in the end of the lease agreement term.
NB! Monthly payments are noticeable affected by the planned remaining value in the end of the lease period. If very high mileage is planned during the lease period, the remaining value of the car will be low and monthly payments will be high.
Full service car lease, or long-term car lease
Full service car lease, or long-term car lease is most often chosen by companies, principal activities of which are related to provision of services or production and delivery of products to customers. Within the framework of this car lease type all or individual car operation-related costs are included in monthly lease payments – starting with the first registration in the RTSD, annual technical inspection costs and duties, OCTA and KASKO insurance to maintenance, repairs, purchase of new tyres, tyre service and even spare parts. For the car to be always available to the customer in perfect technical condition, all its operation-related matters are solved by the full service car lease service provider.
What are full service car lease advantages?
+ car fleet costs are transparent, uniformly distributed over a longer period and easy-to-plan;
+ lease cars are not considered a fixed asset – company’s balance is not additionally burdened;
+ significant optimizing of finances, time and human resources – outsourcing provider can provide for high efficiency in use of resources, additionally – no staff unit inside the company is necessary for the car fleet management;
+ facilitated accounting – company receives one invoice for all car-related services;
+ 24/7 customer support – safety, support and continuous operating assistance to car users.
Full service car lease weaknesses:
- not suitable for companies planning to use cars a long time (more than 5 years) or planning very high mileage of cars.
If you currently consider how to purchase the company’s cars, it is important to evaluate all aspects – financial resources necessary for provision for daily needs of car users and specifics of the company’s activities – the more cars are used in principal activities, the more the decision made will affect customer service during a number of years.
Contact Sixt Leasing car fleet management specialists, in order to make a correct decision! Phone +371 67819520, e-mail: firstname.lastname@example.org
Piece of advice! Company’s car nowadays is not just a tool, but also a business card and more and more often an efficient advertising area helping achieve the company’s goals. It is important for provision for successful activities to arrive to the customer at the agreed time, to receive or to deliver goods in time – company’s car is virtually indispensable for performance of these functions. A significant benefit is when the car additionally serves as an advertising object, reminding existing customers of the company’s provided services/produced goods and attracting new customers.