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Owner or Lessee
Long-term leasing and other forms of financing
A long-term lease offers substantial support to your company. It does not tie up capital, it reduces investment and capital costs subject to depreciation and it enables an equal distribution of expenses over the life time of the contract. What alternatives are there to long-term leasing on the market? Discover how a long-term lease differs from other forms of financing.
Owner or Lessee: What are the consequences of this choice?
- When a company purchases a vehicle (cash or loan)
When a company purchases a car by cash or loan, it becomes the owner. The vehicle represents an investment asset which is recorded in the company's assets. The vehicle is depreciated and entered into the operating costs over a period of five years. If the vehicle is purchased by loan, the amount of the loan is recorded in the company's liabilities and the interest on it is recorded as a financial cost. - When a company uses financial leasing and then purchases the vehicle (financial leasing)
Financial leasing allows purchase of the vehicle by the lessee upon expiry of the contract. The company is not the vehicle owner for the contractual period, but its lessee. Upon expiry of the contract the company buys the vehicle for an amount agreed upon at the signing of the contract. The vehicle is not included in the lessee's assets. If the company chooses to make a down payment, which is typical, it is gradually included in costs over the life of the contract, which is at least five years. In the event that the lease is terminated early, the impact on the lessee is usually substantial. - When a company's vehicles are on a long-term leasing contract (operational leasing)
A long-term lease is not recorded as financing. The vehicle is outsourced and the company is the lessee, not the owner. No entry is made in the company's balance sheet. The company makes a monthly payment which includes not only use of the vehicle, but all necessary services connected with the vehicle such as: maintenance, assistance service, tire replacement etc. The amount of the lease depends on the model of vehicle selected, the term of the contract, the estimated mileage to be driven and all services for the vehicle.