Today, most Ukrainians do not have the opportunity to buy expensive equipment, for example, a car. So, many take out a loan and buy the necessary equipment, but there is another way out – using leasing. This service is available to individuals and legal entities. What is leasing? Which is better – installment, credit or leasing? Pros and cons of leasing and how to organize it?
Leasing service - concept and characteristics of the procedure
In Ukraine, a bank lending service is considered to be more popular, although many are already using leasing in Europe and around the world.
Legally, leasing operations are a certain type of investment that is provided by the lessor to the lessee with the right to redeem the goods. In most cases, the product is a car or other expensive equipment.
Car leasing – what is it? The essence of the procedure is as follows: anyone who wants to buy a car signs a contract with a finance leasing company. The company pays the entire cost of the goods, if it is a car, then makes the withdrawal at the MREO, pays the insurance and collects all the documents. The car itself is delivered to the user, who, according to the terms of the contract, will pay a certain amount every month. In fact, this amount that is passed on to the company is the payment of the value of the car. As a result, in a few years the buyer will have the option to acquire the goods with full ownership rights.
Therefore, in simple terms, we can say that leasing is one of the modalities of leasing.
The most profitable option is installment, credit or leasing
Financial institutions today offer many services that benefit both themselves and their users. Most of the time, Ukrainians turn to bank loans in search of better deals with lower interest rates and the opportunity to get a higher amount. But now the leasing procedure is becoming more and more sought after by individuals, businessmen or companies. What are the characteristics of the different types of transactions – installment, loan or leasing?
- installment – a financial procedure, the essence of which is that a user buys a product, becomes its full owner. But the cost of the equipment is paid gradually. The advantage is that there is no need to pay a high price right away, but you do need to be prepared for the fact that you will have to pay a much higher cost as a result.
- Credit It is Ukraine's most popular financial service, used by more than half of the country's population. The difficulty is that in order to get a loan, you need to prove to the bank your solvency – have a job or provide collateral.
- Location – in the purchase of expensive equipment, a more profitable procedure than a loan or installment plan. In some countries, much more equipment is leased than with the help of other methods. The main advantage is that you can gradually pay the cost and then bring the equipment to the location.
What is a leasing company?
It is a commercial organization created in the form of a joint stock company. The work of companies is regulated by the Civil Code of Ukraine. It detailed the specifics of the company's work, contract details, reimbursement methods, and other subtleties of cooperation between the leasing organization and the lessee.
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Who can be a lessor?
Generally, this function is performed by a specialized company. But leasing can also be provided by a commercial bank, credit organization or other institution. It must be remembered that even an individual can be considered a lessor. A person buys a car or other product at his own expense and then signs a lease with another legal or private person. All terms and laws apply to this relationship.
Types of leasing and their features
The lease procedure is essentially of two types – financial and operational.
- Financial leasing is a service provided by a lessor on the basis of a contract. Upon expiry of its validity period or after full payment of the agreed amount to the person who supplied the goods, the lessee becomes its full owner. The contract basically fits the period, which is the useful life of the device, that is, until the end of its operation. These relationships are considered long-term loans.
- Operating leasing is also a form of leasing goods. It differs from finance leases in that the use is granted only for a certain period, at the end of which the lessee must return the goods. According to the terms, a certain cost is paid for the car or equipment. In fact, operating leasing is a form of leasing assets.
Advantages and disadvantages of renting
Most financing systems have pros and cons. Leasing is compared to borrowing, so anyone who wants to use this service needs to familiarize themselves with the advantages and disadvantages of the procedure.
The main useful properties of leasing:
- Less stringent requirements for the tenant than if you had to use the services of a bank.
- Short term for consideration of the request.
- The ability to change the timing of payments, the amount and other terms of the contract.
- There is no need to provide a guarantee.
- Leasing equipment is not the purchase of a device; it remains the property of the leasing company, so lenders cannot claim it.
There are also some disadvantages. In general, there are far fewer of them, but they are quite substantial.
The recipient of the lease is not the owner and the rightful owner. The contract with the company sets out all the conditions that will govern the relationship between the user and the company. It also states that the lessee is not the owner, although he may temporarily dispose of the goods.
Only after full payment of the entire amount, the user will be able to consider the car or equipment as his own.
It should be borne in mind that the leasing company itself can claim the return of your property. This rarely happens, but it does, so you need to be prepared. The reason may be financial difficulties of the company, which makes a formal claim to the court and, by its decision, can withdraw the equipment or car. Therefore, before signing the contract, read it carefully and also familiarize yourself with the position of the rental company in the market.
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A private company, a small restaurant urgently needs to buy a new professional cook. But at the moment there is no free 16 thousand hryvnia, so the owner, together with the accounting department, applies to the leasing company and rents out this equipment. The stove is purchased, installed in the enterprise and the cooks already have the opportunity to use it. Thus, the restaurant will be able to gradually pay a certain amount of the budget and in a year it will be able to have the stove fully at its disposal.
To use the service, you need to understand how leasing works and what its features are. Everyone will be able to independently choose whether they need to lease, pay in installments or borrow.
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