Leasing is a convenient form of purchasing a car with deferred payment, in which the vehicle is leased for a certain period and is gradually purchased with regular lease payments. Unlike a loan, car leasing is more accessible and profitable, although it has its own specific disadvantages.
For a long time, only commercial companies and individual entrepreneurs (legal entities) could lease cars, but since 2011, this opportunity has become available to ordinary citizens of the Russian Federation. What is car leasing for individuals, how is it formalized, what are the pros and cons?
Why do you need leasing?
Many people want to buy a car, and this can be done in different ways - take out a loan or buy with your own funds. Not long ago, a new type of purchase appeared - leasing, which is available to both legal entities and individuals.
Leasing is the acquisition of property for long-term use, with a subsequent right of redemption. In other words, it is a long-term lease, at the end of which you will be able to take ownership of the property.
Not only passenger cars, but also freight vehicles and special equipment can be registered in this way.
Buying a car on lease for legal entities is a fairly popular area. In this way, organizations improve and expand their fleet. Entrepreneurs buy cars for use, and financial institutions and car dealers have stable profits.
About leasing for individuals
Today in Russia, the scheme of purchasing a vehicle on lease is not very common among individuals . Many citizens prefer to use their own car rather than pay money for a car owned by a leasing company .
At the same time, using such a scheme is an excellent opportunity to purchase a vehicle without a significant impact on the family budget and, after the contract expires, to take another car. At the same time, individuals can buy both a new car and an already used one.
Moreover, for citizens, a significant advantage of purchasing a car on lease is that even pensioners and people with some errors in their credit history can use this service. As you know, for these categories of people, obtaining a loan from a bank will be quite difficult, and sometimes even impossible.
Features of the procedure
In this section we will look at the pros and cons of leasing a car by a legal entity.
pros
- The buyer does not pay the cost of the car immediately, but within the terms established by the contract, and at the same time can dispose of the property after making the first advance payment;
- The transaction may vary. The buyer chooses the most suitable loan repayment schedule and determines in advance whether he will return the car or take it back at the end of the lease period, paying the residual value.
- Legal entities receive tax benefits;
- There are no numerous checks of your documents, no additional collateral or verification of the company’s status is required;
- Speed of registration. Some companies offer to arrange leasing within 1-3 days from the date of application.
Minuses
For leasing organizations this is a rather risky activity. A car is a sought-after property that can be easily sold on the secondary market.
Until the end of the lease period, the car remains the property of the leasing company. And the organization has the right to seize it from the user at any time without any court decisions. All equipment leased is registered with government agencies. And if necessary, it is possible to quickly determine its location.
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What is more profitable - leasing or car loan?
It all depends on the long-term needs of the client. If the recipient wants to rent a vehicle for a long time and then return it back to the company, leasing will be more economical.
If the client’s goal is to purchase a car from his own property, then a car loan is preferable.
But don’t forget about the advantages of leasing - tax benefits, quick registration, no additional collateral.
Advantages and disadvantages of leasing for individuals
Car leasing has a number of advantages compared to bank loan programs for car enthusiasts. Car leasing:
- offers a wide range of rental programs that have no credit analogues;
- allows you to take possession of both new and used cars with mileage, including trucks and specialized ones (on credit - not allowed);
- involves corporate discounts from the rental company (lower cost of the car + the ability to write off part of the rental payments to the car repair account) up to 25%;
- requires a smaller package of documents and minimal time for approval of applications;
- does not require consent from the tenant's spouse;
- allows car rental for motorists with a bad credit history;
- makes it possible to save on a small down payment;
- often does not require confirmation of solvency from the tenant (but the down payment can be increased to 40% of the cost of the vehicle, or a deposit will be required);
- has longer repayment terms than a loan (5 years instead of 3);
- Totally cheaper than a full-fledged car loan and a simple rental vehicle;
- allows receiving additional services from the lessor (writing off costs for car maintenance and components, repairs at service stations, replacement of tires, replacement cars during repairs, etc.).
The advantages of car leasing for individuals are associated, first of all, with the fact that leasing companies deal with a lower level of risk of non-payment. Initially, the rental car remains the property of the lessor and is insured, and can be returned to the owner at any time without involving the courts, or reimbursed in the event of its loss.
Important! There is no single system for obtaining approval from the lessor - each application from tenants is considered individually, after which you will either be refused, or receive approval, or be given recommendations on how to eliminate shortcomings in order to obtain approval.
About the disadvantages
Nothing is perfect in the world, and when leasing a car, you should carefully read the terms of the contract and take into account the restrictions and requirements specified in it for the car lessee:
- by lease term;
- at the cost of the car you can rent;
- by the right of transfer of ownership (after the end of the lease period, you do not have the right to keep the car);
- according to the amount of the down payment;
- by car mileage (for example, no more than 25,000 km/year).
A separate issue is the return of the down payment after the end of the lease agreement. In different leasing companies, the requirements may differ: in some, the contribution is taken into account in the cost of the car and is not returned, in others, part of the contribution is taken into account as a security payment and can be returned if you have not violated the requirements of the agreement.
Step-by-step instructions for the buyer
Choosing a company and familiarizing yourself with the conditions
Choosing a leasing company is the most important stage. You will learn how to find a reliable service provider in the next section.
Now it should be noted that it is important to carefully study the terms of the lessor. This will determine how financially profitable the deal will be and whether your application will be approved.
For individuals it matters:
- payment schedule;
- interest rate (price of services);
- amount of monthly payments;
- advance payment amount.
The terms of the agreement are variable, the borrower can choose the most convenient and profitable payment schedule for himself. Usually the amount of monthly contributions is the same, but you have the right to make your own proposals, and the company may meet you halfway.
Understanding the real cost of car leasing is not always easy. Some buyers do not pay attention to such concepts as “car appreciation”, “residual value”, “depreciation”. The ideal option would be to consult with a professional lawyer about the nuances of the contract.
Pay attention to how the transaction is completed. Large organizations offer several options:
- return the car to the owner;
- exchange the car for a new one and enter into a new contract;
- extend the lease;
- acquire ownership by paying the residual value.
The choice depends on your needs.
Registration of the contract
Requirements for clients in companies are approximately the same. You must be a Russian citizen who is at least 18 years old. A guarantor and collateral are not required.
For individuals, you need to collect the following documents:
- Passport of a citizen of the Russian Federation
- Application for leasing.
- Driver's license.
- A copy of the work book.
- A certificate confirming your income.
Legal entities provide a wider list of documents. Required:
- A copy of the organization's charter;
- Confirmation of the authority of the manager;
- Balance statement;
- Recent tax reporting.
An important stage of the transaction is motor insurance. Often the insurer is a partner of the consignee and acts on his behalf. Civil liability insurance (MTPL) is mandatory for all cars. Voluntary insurance (CASCO) is issued by agreement of the parties.
You can find out more about these procedures in the article: Cost of car insurance.
Experts advise taking out insurance not for the entire period at once, but every year, receiving discounts as a regular customer. In the future, you can choose an insurer with more interesting conditions.
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Exploitation and further redemption
After concluding the contract, the buyer makes an advance payment (from 5% to 49% of the total cost), and the car goes into his temporary use. The recipient is free to dispose of it at his own discretion, using it for personal or commercial purposes. At the same time, he undertakes to monitor the technical condition of the car.
At the end of the lease period, the client has the right to buy the car into his own ownership, if this clause is included in the contract
Some leasing companies in Russia can provide additional services:
- partial or full payment for repairs in case of breakdown.
- seasonal tire change
- Maintenance.
Such pleasant bonuses are usually provided for the purchase of new cars or when selling well-known car brands.
Since sellers are interested in selling their cars, customers may be provided with benefits and discounts.
Comparison with car loans and leases
In fact, leasing can be called a type of car rental, which has its own distinctive features. When compared with the classic concept of leasing, car leasing has some nuances:
- A person can independently choose a vehicle, which the company will buy at its own expense. The client is not limited solely to the fleet of vehicles that the organization has at its disposal;
- The machine is operated on the basis of a financial lease agreement. Its use allows you to count on favorable tax benefits;
- A leased car is the subject of a contract. It becomes the property of the client upon expiration of the contract.
It is also interesting that until 2010, only legal entities and individual entrepreneurs could take advantage of car leasing programs. Private individuals were not allowed to participate in such transactions. But now everyone can take advantage of a rather favorable offer under the leasing program.
At the same time, many are interested in what is more profitable to take out when purchasing a car - a loan or leasing. Is leasing good or does a car loan have more advantages? In order to understand which is better, you need to understand the differences between them.
When buying a car on credit terms, the following aspects appear:
- The bank issues a loan. Moreover, each financial institution has its own interest rates;
- The bank decides whether to give the client a loan for a car or not;
- When purchasing a vehicle on credit, the client is obliged to fully pay the cost of the vehicle and the interest stipulated by the bank’s terms and conditions;
- The car is the property of the client, but if the fee is not paid, the bank may take the car away.
In the case of car leasing, we are talking about long-term lease. Moreover, the renter himself has the right to choose the car that suits him. When the choice is made, the company buys this car, and also deals with all issues regarding documents, insurance, registration with the traffic police, etc. After this, the car is transferred to the client on a rental basis.
Leasing is characterized by a minimum package of necessary documents, which is not comparable with the bank’s requirements for preparing papers. The client and the leasing company enter into an agreement, while the vehicle remains the property of the organization.
Every month the client must pay for the operation and use of the car, additionally paying for insurance costs, etc. Leasing payments are often significantly less than the required monthly loan payments.
How to choose a company
The number of leasing companies operating in our country is constantly growing. Each of them attracts customers by declaring exclusive offers and advantages, while keeping silent about the pitfalls.
Financial investment experts recommend paying attention to the following details:
- financial condition of the company;
- period of work on the market;
- customer reviews;
- cost of services;
- leasing restrictions;
- company reputation;
- number of branches;
- availability of services for the buyer;
- staff size;
- courtesy of employees;
- openness of information.
If a company has been operating for a long time and has a large number of completed contracts, such an organization is definitely worth paying attention to.
About additional costs
Ultimately, all costs associated with operating the car will fall on the shoulders of the client. This may include:
- purchase of additional equipment;
- insurance (mandatory);
- transport tax.
Sberbank leasing
All this will be included in the final leasing amount, but payments will be spread evenly over the entire term of the contract. If we talk about fines received from traffic cameras, photo and video recording, then the tenant will be responsible for them. Receipts will be sent to the owner, who, in turn, will send them to the client.
Attention! At this time, fines will become the main payment! Monthly fees will not be counted until the client pays the fines. More precisely, fines will be paid from these payments, and the remaining amount will be accepted as payment.
FAQ
Is it possible to buy a used car?
Some lessors provide this opportunity, but not all. Most companies work directly with suppliers and manufacturers, and therefore they only lease new cars.
How to get by without a down payment?
In this case, you need to find an organization that provides such a service to customers. Typically, such offers are offered by large organizations during PR campaigns or marketing campaigns. Or vice versa, small companies seeking to increase their turnover.
What happens if payments are late?
It is worth remembering that the car belongs to the leasing company, and not to the buyer, as with a car loan. The company has the right to return its property at any time if the recipient violates its obligations. The involvement of government agencies is not required for this, and the procedure itself occurs quite quickly.
Therefore, there is no need to delay monthly payments. As a last resort, it is worth warning the leasing company about this.
The process of leasing a car
- Checking the set of necessary documents of the Service Recipient.
- Legal registration of a leasing transaction between the parties, providing for the right to subsequently purchase the vehicle.
- Determining the amount of the first payment as a percentage of the total cost of the vehicle, as well as the schedule and volume of subsequent payments.
- Preparation of insurance documents for the subject of the transaction.
- Carrying out registration procedures at the traffic police.
- Drawing up a transfer and acceptance certificate for the vehicle.
It is worth mentioning that the stronger the financial position of the organization or individual - the potential Lessee, the higher the chance of successfully concluding a leasing agreement. The latter’s successful similar previous experience is also a positive factor.
You (your company) do not have an exceptional credit history
It is possible to use leasing with a bad credit history , but it can be more difficult and more expensive than when you have a good credit history. In general, leasing companies prefer reliable clients, and it is not always possible to meet the requirements of the lessor. Preparing the company's financials may take a long time, but in the end they may not be suitable for the lessor.
In the case of a loan, although it is more expensive, it is easier to find an option with the credit history that you currently have. To find the best one, you can get pre-approved offers from several banks without leaving the dealership.
Do you constantly use your car?
When you own a car, you can drive it as much as you want. Including very little if you need to preserve the value of the car. With the exception of the price of fuel and maintenance, there are no additional costs for each kilometer traveled.
Leasing may come with mileage limits, and when you go over those limits, it incurs additional costs . This limit is set depending on the car model.
If you can anticipate your annual mileage, it's not a problem. But if you don’t yet know how much you drive, then there is reason to doubt leasing .
Do you like modifications?
Do you want to paint your BMW pink, put on designer wheels - if you are the owner of a car - please do whatever your sense of taste tells you. If the added modifications increase the value of your car, great, you can get your investment back when you decide to sell the car.
If you are paying off a loan, the contract allows for a limited number of modifications (for example, a roof rack) before the end of the payment period, but major changes will have to wait until the last payment.
But in leasing, only reversible modifications are allowed - because you must return the car to its original appearance before transferring it to the leasing company (taking into account natural wear and tear). Even if the changes only increase the cost of the car, the leasing agreement most likely states that you need to return the car the way it was given to you for use.
You don't want to pay for a car all the time
Most lessees at the end of the leasing period transfer their car back to the leasing company without receiving any cashback or advance payment. But in fact, after inspecting the car, you may have to pay some extra money for increased wear and tear or repairs .
Many leasing companies offer a trade-in for the car , meaning that the proceeds will be just enough for the down payment on a new lease agreement - in general, this is suitable for you if you want to change the car every few years , constantly making lease payments.
The main difference between a loan and leasing is that monthly payments end as soon as the cost of the loan is repaid, and the car becomes yours.
Insurance
The leasing company obliges to use the most comprehensive insurance options that would cover the remaining payments under the leasing agreement in the event of total destruction or theft of the car. Despite the fact that the choice of insurance company is usually limited to several partner companies of the lessor. Often the cost of insurance is already included in the lease payment , so when drawing up a contract you need to determine what the actual cost of coverage is.
Most dealers will also not mention at the time of purchase that insurance can be purchased elsewhere. Therefore, before purchasing a car, you need to do research on how much it will cost to cover your car . Print out your best offer before going to the dealership so the dealer can beat it.
