What is leasing for new and used cars and what can be included in the lease payment?
Leasing is a middle ground between renting and credit. When a client decides to lease a new or used car, they apply to a leasing company. The company purchases the required vehicle from a seller and provides it to the client for use in exchange for a monthly fee for the duration specified in the agreement. Usually, once the term expires, ownership of the asset is transferred to the client (this is known as financial leasing); however, there is also operating leasing — where the equipment is returned to the leasing company. Specialized machinery or industrial equipment can also be leased.
- Equipment depreciation for the entire term of the agreement;
- Interest on the borrowed funds used by the leasing company (loan interest);
- Commission fees to the leasing company;
- Insurance and other additional services (valuation, expert opinion, if required);
- The cost of the equipment being purchased, if the agreement provides for a subsequent buyout.
Sometimes, taxes are also included in the payment:
- Property tax — if the equipment is on the leasing company's balance sheet and the leased asset is taxable;
- Other taxes (e.g., vehicle tax, if the car is registered to the leasing company).
An individual can include almost all car expenses in the lease payment: insurance, scheduled maintenance, tire service, etc.
List of documents for car leasing
To assess the client's reliability and solvency, the leasing company will request:
- registration documents (certificates, extracts, and statements);
- financial statements (balance sheet, statement of financial results);
- bank statement from the bank where the account is opened.
The required set of documents may vary between different leasing companies and depends on who is applying for the service: an individual, a legal entity, or a FOP. Therefore, if you decide to lease a car in Kyiv, it is best to confirm the list of necessary documents with the managers of your chosen company by phone.
What is the procedure for leasing a new or used car?
- After you submit the required documents to the company, the terms and your payment schedule are negotiated. It is created individually for each client and depends on their capabilities, needs, and the specifics of your business. The schedule can be seasonal, accelerated, classic, or otherwise.
- Wait for the financing decision. As a rule, it is made very quickly.
- Next is the signing of the agreement.
- The leasing company purchases the car from the seller and transfers it to the client for use.
Specifics of car leasing for individuals
More and more individuals are choosing to lease a car: Kyiv is no exception. Leasing of commercial vehicles and trucks is developing particularly actively. After all, when it comes to a passenger car, a private individual always has an alternative in the form of a car loan. However, it is almost impossible for an individual to get a loan for a truck or other specialized machinery. But the leasing of used cars, as well as new passenger cars, also continues to gain momentum. After all, it offers a wealth of advantages:
- A private individual is provided with a significant corporate discount (sometimes reaching a quarter of the vehicle's value);
- In some leasing programs, the monthly payment is lower than a loan payment;
- Applications are processed and agreements are signed faster;
- You can lease not only a new vehicle but also purchase a used one — both passenger and commercial.
Risks of car leasing
- Payment delays may lead to the termination of the agreement and repossession of the vehicle. Payments made up to that point are not refunded to the client.
- Violation of insurance terms or improper operation of the equipment can also lead to the termination of the agreement. All additional requirements are specified in the contract.
Risks are present in any business, but if everything is done correctly, they can be avoided.