Advantages and disadvantages of car leasing

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Advantages and disadvantages of car leasing

Advantages and disadvantages of car leasing

The leasing service at GRAND PRIX MOTORS is the most constructive, in terms of profit, way to get a car in a situation where there are no funds to buy a new car or the vehicle will be needed only for a while. If you don’t want to take loans or spend money on something that you won’t need in a couple of weeks, use financial lease, that is, leasing.

Leasing is a long-term lease, the terms of which stipulate that the lessee will pay a fixed amount every month. It consists of the payment of the vehicle itself, the rental fee and interest. The advantage of a leasing agreement is that after signing the tenant becomes the full owner of the property. This type of lease is preferred by legal entities due to possible tax optimization.

Also, under a leasing agreement, the tenant is provided with a comprehensive set of services, which would require additional costs for car loans:

  • conclusion of a purchase and sale transaction with a car dealer;
  • car registration;
  • drawing up a vehicle insurance contract;
  • payment of transport tax.

By purchasing commercial vehicles, special machinery or equipment under a leasing agreement, legal entities and entrepreneurs save a significant amount of corporate funds on taxation, while increasing income through work activities.

What is the point of leasing?

Leasing  is an economic tool, thanks to which the lessee can use the car with the right to buy it on the conditions stipulated in the contract. At the same time, in the list of obligations of the lessor, the leading position is occupied by the question: How to purchase from a car dealer the car that the second party needs and provide the property to the client for a fee?

Important point! A user who has bought a vehicle on lease will become its owner under two conditions: the expiration of the contract and payment of the residual value of the vehicle.

Benefits of car leasing

When deciding whether to plunge into leasing operations when buying a car, you must be clearly aware of not only the advantages, but also the disadvantages of such a transaction.

It is not so important for what exactly: to increase production capacity or for personal use, a vehicle is purchased. Under the leasing agreement, the client receives several additional services, including auto insurance, included in the list of leasing payments. Thanks to this, the  costs are evenly distributed over the entire duration of the contract .

It is also important that not every organization has sufficient capital at the initial stage of its development to purchase the necessary equipment. Thanks to leasing  , it is possible to keep most of the funds in circulation and at the same time acquire the necessary equipment, special equipment or machine on the most favorable terms . This list of benefits is not limited to:

  • the accelerated depreciation mechanism is applied;
  • there are trade preferences;
  • an individual payment repayment scheme is developed, which provides for all specific aspects of the organization’s activities, for example, seasonality of work;
  • the minimum term for the execution of the contract;
  • Loyal requirements for customers regarding the preparation of the necessary documentation;
  • the possibility of updating fixed assets;
  • after the expiration of the contract, you can change the car to a new one.

In addition, when using the leasing program, you can take advantage of some tax preferences that can partially compensate for financial losses.

Disadvantages of car leasing

Of course, the description of leasing is not limited to the advantages, here is a list of disadvantages:

  • the leasing company remains the owner of the purchased property;
  • sublease is not possible without the permission of the lessor;
  • individuals do not receive benefits

Nevertheless, leasing is, perhaps, a universal solution for small and medium-sized businesses, since borrowed (credit) funds will not help return even part of the capital spent.