What is car leasing? | Companion

Location It is the long-term lease of a vehicle with an option to purchase at the end of the term. When you rent a car, you do not have the opportunity to transfer it to a third party, sell it or donate it (the property still belongs to someone else). Many people confuse credit and leasing, which is not strange, because the mechanism is similar and at the same time has significant differences.

Individual lease terms are more profitable than other methods of buying or renting a car.

I propose to discover together how this financial instrument works.

Read too: What is the difference between secured and unsecured loans?

How does car leasing work for individuals: types of leasing

There are two types of leasing that you can hire from a specialized company, a dealership or a rental company. In both cases, you make monthly payments, keep the car in good condition: seasonal tire exchange, technical inspection, getting MTPL insurance policy, fuel expenses. But these additional services can also be entrusted to the company if they are included in the contract. You don't become an owner right away, as is the case with a purchase on credit. The car becomes property after the end of the business.

Types of car leasing for individuals

No redemption at the end of the term.

Check it out:  What is an interest-free loan - an overview of the main issues

The user returns the car with the opportunity to rent another car. This is called long term use for those who tend to change vehicles every 1-5 years. This type of leasing allows a person to operate modern models without buying and selling cars, which is convenient.

With redemption at the end of the term.

The buyer buys a car at the expiration of the contract and it becomes his property after all payments are made. Leasing companies charge a much lower monthly installment than a car loan.

Why is car leasing to individuals better than a loan?

We have already mentioned above that the conditions of vehicle financing are lower than those of vehicle leasing. Now let's see why it is worth giving preference to the second option of buying a vehicle. Their:

  • you can use and in the future buy a commercial vehicle (buses, vans, special equipment, trucks and all vehicles that will be used for billing); The loan, in this case, is problematic for individuals;
  • the payment system is flexible and offers the customer several payment methods;
  • the initial payment affects the additional amount of the fee (so it may be less than the credit);
  • renting a vehicle through leasing is significantly cheaper than through any other lessor;
  • payment for additional services is divided evenly by payments, as well as car insurance;
  • a minimum of documents when registering a car for lease to an individual;
  • a rental request is processed much faster (with some companies you may be responded to within 24 hours);
  • there is no need to deposit a deposit and appoint a guarantor;
  • In case of car seizure, car rental companies do not resort to the courts, unlike credit companies.
Check it out:  International companies are leaving Russia in droves: from PayPal to Mercedes, from Nike to the new “Batman”

When do you become a car owner?

Many people are alarmed by the fact that, with car rental, the vehicle does not fully belong to the customer until he pays the full amount.

Whereas, when you apply for a loan, you immediately receive the property. But it's not like that. In both the first and second cases, the company has the right to deprive you of your car. Let's see what car leasing for individuals is in terms of security of deposited funds.

When the car is on a loan, it is considered collateral until you pay the last payment. In case of failure to deposit the final amount, the car will be seized. Therefore, you are not one hundred percent owner of the vehicle.

Car leasing for individuals works in the same way: if you don't pay the money, you are deprived of your car.

Therefore, we can conclude that in any case, the final decision as to whether you are the owner or not is determined by the last installment.

you might be interested: What is an interest-free loan – an overview of the main issues.

car rental

How to buy a rental car: every step from filing documents to re-registering a car for you

We found out what car leasing for individuals is, we learned all the pitfalls, compared it with the loan and now let's find out how the purchase takes place.

Choose a reliable leasing company and decide on the car.

Remember that you are entering into a long-term partnership and must trust the company's reliability. Analyze each for yourself, don't give in to someone else's opinion on this matter.

Gather the necessary documents and send them to the company.

It is usually a passport, tax code, income statement, account statements and property documents to ensure you can afford it. The list of documents may be slightly different, it is worth asking the specific selected leasing company. The rental company will check your package of documents and then inform you of the decision.

Signing a contract.

At this stage, it is important to negotiate all the terms of the transaction (terms and amount of payment, additional services, the procedure for transferring ownership of the car). At the same stage, the leasing company draws up a contract for the purchase and sale of the chosen car with a dealer.

Making the first installment and renting a car.

The first installment partially covers the cost of the vehicle issued. The remainder of the amount is paid by the leasing company and registers the property, and subsequently leases (rent) to you.

The car is at your disposal.

We remind you that the rental of cars from individuals deprives the customer of the sale, assignment of the car to third parties and pledge to any financial institution, etc. The lessee has the right to check the condition of the vehicle at different intervals.

Re-registration of documents for you and taking possession of the car.

After the contract ends and all contributions have been paid by you, you must proceed with the paperwork for yourself. After completing this procedure, you become the owner of the car.

Check it out:  The biggest Asian bookmakers | Companion

And so, now you have a complete view of what car leasing for individuals is. It is a great financial tool to save money. We recommend taking this into account when buying a car.

Good deals!

Number of views: 1 422