Leasing means renting or leasing and is an alternative solution to buying a car. A contract is concluded between the lessor and the lessee. The lessor makes the car available to the lessee for a certain period of time and the lessee has to pay the fixed monthly installments until the end of the contract.
How does leasing work?
The duration of a contract between the lessor and the lessee is usually between two and five years. Unfortunately, the leasing contract cannot be terminated. Even if the lessee becomes unemployed, for example, he cannot get out of the concluded contract. The vehicle remains the property of the lessor. The lessee only receives the right of use temporarily and may use it against payment of the monthly installments. Insurance, repairs and maintenance must be paid for by the lessee.
The kilometers driven are determined in advance. If this number is exceeded, the lessee will have to make an additional payment. The leasing contracts very often include fully comprehensive insurance and dependence on authorized workshops.
With residual value leasing, it is contractually determined how much the car should be worth at the end of the contract period. It is important to determine whether scratches in the paintwork or stains on the seat covers are the usual signs of wear, or whether it is excessive use. If the vehicle shows many signs of use and brings a low return, the lessee has to pay for the damage. The lessee thus bears the residual value risk.
After the contract expires, a new contract for a new vehicle can be concluded immediately. However, the lessee can also extend the contract after the end of the contract or buy the car himself against payment. Of course, the vehicle can also be returned to the lessor immediately after the end of the contract.
With direct leasing, the car is rented directly from the manufacturer. With indirect leasing, a bank or leasing company rents out the car.
Leasing makes sense if you want to split the financial costs. Leasing is particularly worthwhile for companies, because if the car is used commercially, it can be tax deductible.
Calculation of the monthly rate
The monthly rate depends on many different factors. The type of vehicle is very important. The more expensive the vehicle, the higher the monthly rate. The mileage per year also influences the level of the monthly rate. The more kilometers you want to drive with the vehicle per year, the higher the monthly rate. The contract period also plays an essential role in calculating the rate. A short contract period means a higher monthly rate, as the fall in value is highest in the first few years of a new car. If a high initial payment is made, the monthly rate is lower. If no down payment is made, the rates increase significantly. In the case of leasing without a down payment, the down payment is divided into the monthly installments.
Advantages and disadvantages of leasing
A clear advantage of leasing is that not the entire value of the car is paid off, only the loss of its value. The monthly financial burden for leasing is lower than when buying a car. You drive a new car despite having a low start-up capital. If the vehicle is used commercially, the costs can be deducted from the tax. The car can be adapted to your wishes and needs. In most cases, the monthly rate includes insurance and maintenance costs. The ability to take over the car after the contract expires is also an asset. Of course, the car can also simply be returned and the lessee does not have to worry about the sale.
A major disadvantage is that the financial burden is there every month. You are also bound by a contract for several years. The lessee only has the right to use the car. It is not his property. The car must be returned in perfect condition after the contract period. In addition, the limitation of kilometers is also a disadvantage, especially if it is exceeded. In this case there are additional costs.