Many people who cannot pay for their new vehicle in cash are faced with a challenge: Because they are not sure whether to finance or lease it. Leasing and financing each have their own advantages and disadvantages, which should be carefully considered when making a decision. The following article shows what should be particularly important.
Cash payment still has most of the benefits of buying a new car. Here there is the chance of a considerable discount, no installments have to be paid and no interest is charged. However, only very few have the change to spontaneously finance the vehicle purchase in cash. In this case, the principle applies that those can save the most here who carefully compare the terms of leasing and financing. Negotiations with the respective seller should always be skillful. With the necessary specialist knowledge, a confident appearance is possible without any problems.
The benefits of leasing
Leasing a vehicle is particularly worthwhile for companies and business people. Because it is possible to deduct the monthly leasing rate from tax as business expenses. In addition, it has a better effect on customers when employees are out and about in a current vehicle model. The car does not have to be offered for sale at the end of its use, but can be returned simply and easily. In addition, the monthly payments are usually relatively low.
The disadvantages of leasing
Of course, leasing a vehicle also has disadvantages. For example, there is usually a limited amount of kilometers. If this is exceeded, the price for the replacement of the car increases very sharply. However, it is also possible that the leased vehicle will be acquired by the lessee himself after the period of use within the lease - but this is not mandatory.
When a leasing contract is concluded, the maintenance of the vehicle and its care must not be taken very seriously. The terms of a leasing contract usually range from two to four years. An early termination of the contract is usually not possible, but in some cases it is possible to have the leasing contract rewritten to another person.
The benefits of funding
If financing is chosen for the purchase of a vehicle, then there are usually fewer restrictions for the buyer than with leasing - because with financing, the vehicle becomes your own after paying off.
The terms of financing can be longer than with leasing - but this is not a disadvantage here. If the financing is set over a longer period of time, the amount of the monthly payments also decreases. In addition, there is the advantage of financing that some manufacturers equate financing through a loan with a cash payment. The price negotiations and the possible discounts are more promising.
The disadvantages of funding
Financing doesn't necessarily have more advantages than disadvantages. In contrast to leasing, it is not possible to claim the monthly installments for tax purposes. The vehicle value is only depreciated over the corresponding period. On the other hand, it is possible to deduct the installments for leasing as long as the leasing contract is running.
Not sure whether to finance or lease? There is also no general correct answer to this question. Because the decisive factor here are the personal and individual living conditions in order to decide whether to lease. or funding are a better choice. Before concluding the purchase agreement, it is advisable to check in detail which method offers the most personal advantages. For the self-employed or businessmen, this is in most cases leasing a vehicle, for private individuals, however, in most cases financing - this rule does not always apply.
The respective binding and the use of the vehicle also play a role in any case. Here everyone should ask themselves whether the vehicle should be in their own possession after the end of the term or whether it is no problem to return the car after the period.
Which insurance policies are necessary for leasing?
Safety should also be taken into account when leasing a vehicle. In any case, the lessee will have to take out comprehensive insurance and liability insurance. If an accident occurs due to someone else's fault, the damage is paid for by the opponent. In such a case, the failure of the leasing car is not covered. Only the conclusion of a leasing installment insurance can help. This will continue to pay the installments to the lessor if the vehicle in question can no longer be driven due to an accident caused by third party negligence. The same applies if the accident was the fault of the lessee. The replacement value of the vehicle is replaced by the comprehensive insurance. The costs, which can also include full amortization, are covered by the so-called GAP insurance for the lessee.
Leasing - which workshop should be chosen?
As a rule, a specialist workshop must always be used for the leasing vehicle. A fixed workshop is often mentioned in the relevant contracts, in which the necessary repairs are carried out. In any case, this should be taken into account before the leasing contract is concluded.
When is leasing not possible?
A certain credit rating is not only required when financing a vehicle, but also when leasing. If the potential lessee's creditworthiness is insufficient, the leasing request may be rejected. It is helpful to request a self-assessment from SCHUFA before concluding the contract. In this way, any incorrect entries can be deleted before the contract discussion.
The level of regular income plays an important role for private individuals. A leasing contract is difficult to get with a temporary employment contract or as a mini-jobber. The same applies if the potential lessee is in the trial period. In this situation, new car leasing can be quite problematic. But companies can also be denied the new leasing contract if the current situation of the company does not allow leasing.
The tax benefits of leasing
Leasing has tax advantages especially for business people within a company. The leasing vehicles that are due per month can already be deducted as operating expenses at the respective time of payment. This is not possible with financing on this scale. Here, the total costs can only be included in the depreciation over the specific service life of the vehicle. This means that the costs of a leasing vehicle can be deducted for the entire duration of the leasing. This regularity makes accounting easier.