What is the difference between a car loan and a lease?



Leasing a car is a procedure often used by companies. This solution has many advantages. Not only does it reduce costs, but it is also less time-consuming when dealing with related matters.

A few words about leasing

A few words about leasing

In leasing, the lessor lends the customer (the lessee) a specific item, for example, a car. The advantages of leasing include, among others, easier procedure and testing of creditworthiness based on the internal criteria of the leasing company.

Companies can settle operating leases by putting them into tax-deductible expenses. The entire leasing installment is treated as the cost. In the case of a car loan, only interest and loan costs can be included in the costs.

Car loan?

An entrepreneur who is thinking about buying a company car often has a real problem, what to choose: credit or leasing. With a car loan, the procedure is much more complicated and the assessment of creditworthiness more stringent. In turn, leasing is perceived as more favorable due to tax benefits and smaller formalities.

Big Brother decided to compare leasing and car loan offers for companies. For each of the options, we considered both a new and a used car. So it’s time to go to the specifics and find the answer to the question:

Where to lease a new car?

Where to lease a new car?

To compare the lease offers of a new car, we have adopted the following assumptions: the value of the car USD 60,000, the amount of the lease is 80% of the value of the car, duration of the contract – 5 years, after the end of the contract, we assumed the purchase of the car by the lessee.

The lowest leasing installment under the above assumptions as of today is proposed by Fine Bank (868, 16 USD net), however, the suggested purchase value of the car is 10%.

The second one is Good Finance, where the monthly installment will be 917.35 net. In the case type, the redemption value is 0.01% of the car value. Good Credit Lease and Fine Bank have similar installments, but the buyout value is 0.1% in the first case and 1% in the second.

Or maybe a leased car?

A used car can also be leased. However, he cannot be more than 11 years old (including the duration of the leasing contract). In the case of leasing of used cars, the following assumptions were made: the car was manufactured in 2010, its value is USD 30,000. As in the case of a new car, the lease covers 80% of the car’s value, and the duration of the contract is 5 years.

At the end of the contract, the car bought by the lessee. Just like the car case, Good Credit Lease introduces a new limit on the maximum value. No company charges handling fees when signing the leasing contract.

We will pay the lowest monthly installment at Good Finance (USD 475.74 net), the highest at Fine Bank (USD 1,140.75 net). The purchase value of the car at the end of the contract is the same as for a new car.

We credit a new car

We credit a new car

For comparison, we also decided to present credit offers for the purchase of a new car. We adopted the same assumptions as for leasing (new car worth USD 60,000, loan amount 80% of the car value, a loan term of 5 years).

The lowest monthly installment (USD 918.63) was offered by Bank, which additionally does not charge any commission. The loan is secured in this case by suspensive ownership and assignment from AC. In turn, we pay the highest installment in Fine Bank Polbank (1,191.09 USD), which charges a 2% commission.

The security is similar to Fie Bank. E-cash’s offer is also favorable, for which the monthly loan installment is USD 954.03 and the commission for granting the loan – 1%. An additional advantage is that the loan can cover up to 125% of the value of the vehicle being credited. All banks allow for early repayment of the loan.

Used car loan

Considering the purchase of a used car for a loan, similar assumptions were made as for a lease for a used car (a car worth USD 30,000 produced in 2010, the loan amount is 80% of the car value, the loan period is 5 years). The maximum age of the car is 19 years (Good Finance), while the longest loan period is offered by Fie Bank (120 months). Similarly, as in the case of a new car loan, we will pay the lowest monthly installment at Fie Bank (USD 432.21). The bank does not charge any commission. The highest installment we will pay at Good Finance Bank in the special offer Spring 2013 as an option in the Package L account (USD 516, 64).

From the examples of offers presented, the costs of credit and leasing are similar. Therefore, it is worth analyzing whether leasing will not save more time that we would have to spend on formalities related to credit. Entrepreneurs who plan to take out a business loan should consider leases that do not reduce their creditworthiness.

You also need to analyze the benefits that you can get from the tax shield. Significant time savings will also be significant, as most leasing formalities are handled by the leasing company. In addition, after the contract period has expired, the car can be bought for a pre-determined price or another one can be leased.

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