When there is a desire to buy a car, but there is not enough money, then, most likely, a person will go to the bank to get a loan to purchase it. But there is an alternative way to solve the problem - it is leasing. What is the difference between a loan and leasing and what is more profitable for an individual to issue?
Car loan: pros and cons
You can get a car loan under a variety of conditions. Offers of banks differ not only in interest rates and terms, but commissions, insurance payments and down payment will also be different. As a rule, the more loyal the requirements of the bank in terms of providing documents, age limits, credit history the more expensive the car will cost. Banks usually require a permanent residence permit in the region where the lender is present. If a person got a job recently, then he is most likely to be refused. Minimum Requirements by experience often start from 6 months.
To get a loan on favorable terms, you will have to spend time searching for a lender, collecting documents and waiting for the bank's decision. This may take from a few days to a month. A car dealership is not always ready to wait for a buyer for so long and may sell the car to another client.
A car that is bought with credit funds will need to be insured. Not all lenders allow you to choose your own insurer. They often impose a certain insurance company with not the best rates. If the borrower refuses to insure it, then the interest rate rises. In addition, many banks also require the conclusion of a life and health insurance contract for the borrower.
The repayment schedule is drawn up according to an annuity or differentiated scheme. Banks do not calculate them individually. In case of problems with the fulfillment of obligations under the loan agreement, it may be difficult for the borrower to agree with the bank on the provision of credit holidays or restructuring.
But despite some inconvenience, The loan also has positive aspects:
- Firstly, the borrower becomes the owner of the car immediately after signing the contract of sale and receives a technical passport in his name. The only limitation is that the car cannot be sold or donated until the loan debt is fully repaid.
- Secondly, the potential buyer also has a wider choice. Leasing programs are not yet as widespread as car loans. Therefore, you can get a loan for almost any new car.
- Thirdly, you can also buy a used car for credit funds. Naturally, there will only be restrictions on the year of manufacture and its technical condition.
The procedure for drawing up a leasing agreement is different from the procedure for lending. After choosing a car, an individual contacts the leasing company, which buys the car from the seller. After that, an agreement is concluded between it and the lessee, on the basis of which the individual has the right to use the car.
Buying a car on lease has a number of advantages. The requirements of leasing companies are more loyal than those of banks. Of the documents, only a passport and a driver's license are usually required. If the lessor requires a certificate of income, then the amount of official income will not be so important.
The lessor bears the costs associated with registering the car and paying insurance premiums. Additional commissions are usually absent. Thus, the lessee does not bear the initial costs, and the available funds can be used to pay the advance. But the company lays all these costs in the amount of interest.
If the tenant violates the rules of the road, then the receipts come to the name of the company. In the event of an accident, the leasing company takes care of all the paperwork.
Another feature of the leasing transaction is the fact that the consent of the spouse is not required for the conclusion of the contract. In the event of a divorce, the car remains with the lessee. In some situations, this becomes a decisive factor for an individual who chooses between leasing and credit.
Leasing companies are usually very flexible in terms of scheduling payments.. Options can be very different. For example, the lessee can pay the main part of the amount in equal installments over a certain period, and pay the rest in the last month of the contract. In case of financial difficulties, it is easier for the tenant to negotiate with a leasing company than with a bank.
The contract may provide for a refusal to buy a car. Also, the lessee can exchange it. This allows you to change the vehicle without much money and time.
Despite all the attractiveness at first glance, Leasing also has significant downsides.. Legally, the lessee does not own the car, and the company has more freedom of action. If regular payments are not made, then the contract is simply terminated unilaterally. When lending at a bank, this will require a court decision. In addition, the lessee must comply with a number of requirements for the operation of the car. For example, many contracts provide for the mandatory storage of a car only in a guarded parking lot. There may also be restrictions on the management of transport by third parties. In case of any violation of the contract, the lessor will simply take the car.
What is more profitable?
The profitability of the first or second option depends on many factors. It is worth comparing the terms of leasing and car loans after choosing a specific car. Many car dealerships cooperate with certain banks and leasing companies, which allows them to create competitive offers. Discounts may be provided for when signing a leasing agreement. At the same time, banks can implement promotional low-interest lending programs together with a car dealership.
In general, it can be determined that for a potential car owner who has sufficient official income and a good credit history, the bank will most likely be beneficial, since it will offer him a lower interest rate. If the driver plans to just buy the car, and not return it to the company, then it will be cheaper for him to get a loan and immediately receive a technical passport in his name.
Apart from situations when it is impossible to get a loan from a bank, leasing is worth it for people who prefer to change cars frequently, especially when it comes to premium models. Thus, you can significantly save time and money on the sale of the old and the purchase of a new car. When drawing up a leasing agreement, an individual will not be burdened with the issues of passing maintenance. The company also provides assistance with evacuation and legal issues. Thus, leasing is easier both in registration and in the subsequent maintenance of the car. But it costs more than a car loan.
Leasing can also be the best solution if an individual needs to purchase special equipment. It will be very difficult to get a bank loan for it.
Buying a vehicle in our country is considered very prestigious. Most cars are bought on a loan or lease basis. Why is that? And this is all due to the fact that there is not always the initially required amount of money to buy a car.
People are increasingly applying for a loan to banks, taking installments from the dealers themselves, and quite recently they have adopted the European experience with leasing services.
Indeed, in Western countries, almost two-thirds of all purchased cars were purchased on a leasing basis. In our country, the situation is somewhat different.
If you are going to expand or update your fleet in the near future, then you need to familiarize yourself with detailed information about the features of credit and leasing, about all the advantages and disadvantages, in order to choose an economically beneficial way to pay for your purchase.
In this article, we will list the pros and cons of leasing a car for individuals, for legal entities, as well as for individual entrepreneurs. The information provided will be useful for those who are still inexperienced in this matter.
The concept of the subject
A couple of years ago, leasing was available only to legal entities, but this moment it is also available to individuals and private individual enterprises. Gradually, this trend is replacing car loan services. Why is it so?
A car loan is designed for a range of individuals for the purchase of vehicles of any type. In this case, the car is simultaneously used as collateral.
A car loan has its own distinctive features:
- lending to individuals - for non-commercial purposes, but for personal use;
- mandatory redemption of the vehicle;
- secured loan is a prerequisite;
- in most cases, there is a mandatory down payment (a certain percentage of the total cost of the vehicle;
- compulsory comprehensive insurance, although there are exceptions in individual cases.
Car leasing is a kind of financial lease of motor vehicles. The essence of such a scheme is that the lessee has the opportunity to gradually acquire the car that he rents.
Also, the future owner will be able to dispose of his own vehicle from the moment of signing the leasing agreement. Initially, such a financial scheme applied exclusively to legal entities, but now it is possible for all clients.
Leasing, as an economic operation, incorporates several tools:
- Contract for the sale of a car.
- Loan processing.
- Insurance.
- Vehicle rental.
An accelerated depreciation scheme for vehicles and a minimum tax rate are the features of leasing for which it is especially appreciated.
In most cases, customers resort to such a service, because the authority for the car appears immediately, but you do not need to pay insurance for it (partially or in full), motor transport is immediately registered in the traffic police database, but this process is handled by the leasing company.
Knowing the definitions of the concepts of "credit" and "leasing", users often perceive them as identical services, so you should understand in detail common moments and distinctive features of each financial scheme.
General points
There are a lot of similar qualities between a car loan and leasing, so they are often confused. First of all, this is the essence and purpose of such financial transactions, because they are intended for a faster and more profitable purchase of a vehicle.
The subject of the agreement is a common thing between a loan and leasing, as it is a car that will become the property of a legal entity.
The contract is the main document with legal force, which is mandatory in every financial scheme.
Both leasing and loan agreements determine the amount of payment, the interest rate, as well as the terms for depositing funds.
What is the difference
There are fewer distinctive characteristics between financial transactions than similarities. But it is from them that customers are repelled when choosing a way to buy a car.
Leasing companies try to offer lower loan interest rates - by 5-10% per annum, but often they exceed credit rates.
During a car loan, the legal entity to which the loan is issued is considered the owner of the vehicle, and during leasing, the car passes into the possession of the lessee only after the agreed amount has been fully repaid.
When leasing, the lessor independently pays the fee to the Pension Fund and registers the car, draws up, which is not the case with lending. Leasing is a complex of services, but a loan is not.
The lessor also provides technical support. In certain cases, he orders a tow truck for delivery to the service station without payment, because at that time the car is in his ownership.
Top tier companies can offer a temporary replacement car when the leased car breaks down.
Which is more profitable, leasing or car loan
It is important to correctly assess the pros and cons of both credit and leasing. Initially, the loan was intended for individuals, and leasing - for legal entities and individual enterprises.
For individuals:
| Peculiarities | Credit | Leasing |
| Is it intended for this category of customers | Yes | Yes |
| Who pays the insurance | Future car owner | Bank/leasing company |
| Availability of accelerated depreciation of the vehicle | Not | Yes |
| Number of parties in the process | Individual, bank and dealer | Individual, lessor, bank, dealer |
| Requirements for the parties | The bank is obliged to provide a loan to the borrower, as specified in the agreement, and the borrower is obliged to promptly repay the money received, including the interest rate. | According to the leasing agreement, the lessor acquires the car specified by the lessee from the car dealer chosen by him and provides the lessee with a vehicle for rent |
| Contract price | The borrower repays the full cost of the vehicle with interest for the bank | Often the payment is higher than in cases of a loan or credit |
| Interest rate | The terms of the contract regulate the interest rate | The payment of interest (under the agreement) is higher than in cases of a loan or credit |
For legal entities:
| Peculiarities | Credit | Leasing |
| For whom is it intended | Yes | Yes |
| Who covers vehicle insurance? | Future owner | Bank or leasing company |
| Accelerated car depreciation scheme | Not | Yes |
| Who is taking part | Legal entity, banking institution, dealer | Legal entity, leasing company and car shop |
| Requirements for the parties | The lender is obliged to provide a loan to the buyer of the vehicle, as specified in the agreement, and he undertakes to make payments in a timely manner, including interest for the use of bank funds | According to the leasing agreement, the lessor acquires the vehicle indicated by the lessor from the car dealership chosen by him and provides the lessee with the vehicle for rent |
| Contract price | Full repayment of a loan with an interest rate | The rent payment is higher than buying a car on credit |
| Percent | Percentage is set at the time of signing the contract | The interest rate is set higher than in cases of a loan or credit |
For IP:
| Peculiarities | Credit | Leasing |
| Is it intended for this category of customers? | Yes, but in some cases | Yes |
| Who issues the insurance policy | Company | Leasing company |
| Is there an accelerated depreciation of the vehicle | Not | Yes |
| Parties to the financial scheme | IP owner or trustee, bank and auto shop | Business Owner, Banking Institution and Car Dealer |
| Requirements for the parties | The lender provides a loan to the buyer of the vehicle (an authorized person from an individual entrepreneur), which he undertakes to cover in a timely manner, including interest for the use of funds received from the bank | According to the leasing agreement, the lessor buys the vehicle chosen by the IP representative from the car dealer chosen by him and provides the car to the tenant for the agreed payment |
| Cost according to the contract | Regular periodic payment of the loan, including the interest rate | The entire amount is paid, but in installments (in the form of rent) |
| Percent | Interest is accrued under the terms of the agreement, they do not have the right to change during the entire period | The rental interest rate is usually higher than for a car loan and a loan agreement |
Each of these financial processes has benefits and disadvantages, but one way or another they are designed to make it possible to replenish or update the fleet of individuals, legal entities, as well as individual enterprises.
It should be noted that both services are actively developing, more and more banks and leasing companies in all regions of the country are ready to provide such financial transactions for their own clients.
For individuals, it is more profitable to take a loan, because it can be divided into a longer period and the interest rate is acceptable for them. And initially the buyer is the full owner of the vehicle and bears full responsibility for it.
In turn, it is optimal for companies and enterprises to turn to lessors, because it is possible to save on taxes and insurance, on maintenance, and at the same time become the owner of the vehicle faster.
Over the past years, a trend has emerged in our country to increase the popularity of car leasing. The reasons for this are a simplified registration procedure, as well as a smaller amount of required documentation.
In cases, the future owner of the vehicle becomes the borrower. It is registered in the technical passport.
When buying under leasing, the owner becomes the banking institution that provides leasing, or the leasing organization itself.
In simple words, the difference between a bank loan and leasing can be explained as follows: the first case is a loan with interest, and the second is a full range of economic services.
It is considered a more profitable financial way to buy a car. All costs associated with bureaucratic issues regarding the car are decided by the leasing company.
At the same time, the first installment in most cases is optional, and you can fully redeem the vehicle within three years (average period).
Experts in this field unanimously argue that it is car leasing that will outlive car loans.
It is issued much faster in terms of time, while documents are required much less, collateral is not needed, insurance and taxes are paid by the lessor, and such advantages and novelty of the service in our country cannot but attract a new client base.
Video: Loan or leasing: what is more profitable for the company?
With the development of areas of activity, it generates a variety of financial resources necessary for conducting activities. This also affected the lending sector. Along with the traditional loan, such a source of replenishment of funds as leasing has appeared on the market. Both banking products are used to temporarily meet the need for borrowed funds. So what is the difference between a loan and a lease?
Terms
Leasing is a contractual procedure in which a leasing company acquires property from a specific seller and transfers it for temporary use to the client. After paying off the cost of the asset and the lender's commission, the ownership of the asset can be transferred to the client. This item should be written in the contract. Regardless of whether the client buys the property or not, the leasing company is responsible for the object during the entire term of the contract.
A loan is a loan that a bank provides to purchase a specific asset. Most often, the acquired property is a pledge under the transaction.
Let us consider in more detail what is similar, how does leasing differ from a loan? What is more profitable for businesses and individuals?
Common features
A loan, like leasing, is characterized by such criteria as urgency, payment and repayment. In both cases, the loan is repaid by returning funds to the lender. Money is provided for a specific period and for a certain fee. Repayment of debt later than the specified period is a violation of the terms of the contract.
What is the difference between leasing and a loan: in simple terms
Comparing both banking products makes sense only when buying an expensive asset, such as a car, equipment or real estate. The very essence of leasing is that a bank or company acquires a certain asset at the request of the client, and then transfers it for temporary use to the client. Therefore, it makes no sense to consider leasing to replenish the working capital of the organization.
In general, the clients of leasing companies are more often organizations or individual entrepreneurs, rather than individuals. The need for this product arises when an entrepreneur wants to purchase expensive equipment, a vehicle or real estate, but he does not have enough own funds. Then he turns to a company that purchases this equipment and then rents it out. The client undertakes to pay the cost of the asset and the interest of the company in stages.
Credit is more attractive to the consumer. The property immediately becomes the property of the client. You still have to repay the loan amount with interest, but for this the client has from 5 (car loan) to 30 years (mortgage). And the overpayment on the target loan will be less than on leasing.
How is leasing different from a personal loan? As in the case of business loans, the main factor is the way the property is used. In the case of leasing, we are talking only about temporary use with the possibility of a subsequent purchase of the asset. During periods of rising interest rates, the demand for leasing increases.
Individuals have the opportunity to purchase agricultural machinery, real estate, vehicles without overpaying large sums to the creditor. AT crisis periods the limits for the provision of borrowed funds in banks are underestimated.
Features for Entrepreneurs
A bank loan can be used to replenish any fixed or working capital. Leasing can only be used as fixed capital. Accordingly, the contract is drawn up for the medium or long term.
An asset purchased under a leasing agreement is not reflected in the company's balance sheet. All payments made under the agreement are not subject to income tax. These costs are borne by the operating expenses of the company. So saving on taxes is another advantage of leasing for entrepreneurs.
Leasing or credit: what is the difference? What is more profitable?
The main difference between these two products is that the loan is always issued in the form of cash. While in leasing we are talking about the provision of property for temporary use. The property purchased on credit is immediately reflected in the balance sheet of the organization, and transferred under the terms of leasing - only after redemption from the lessor and provided that this item is specified in the contract.
What is the difference between a loan and a lease? The advantage of leasing is that it usually does not require collateral. In rare cases, the bank may request a small percentage of the transaction amount. The loan is granted on the security of the purchased or any other property. Moreover, its value can be several times higher than the amount of the loan. This causes a lot of problems for small and medium-sized businesses.
For the lender, a leasing agreement is more profitable. The tenant has more freedom of action in relation to the object of the transaction. Property maintenance costs may be included in the monthly fee. In the case of a loan, the client has to independently seek funds to pay for insurance, taxes and state duties.
Subtypes of leasing
It was already mentioned earlier that the terms of the contract may provide for the possibility of repurchasing the asset. But leaseback can work in a different way. For example, an enterprise sells a piece of equipment to a leasing company and then takes it back under a finance lease. The lessor pays an advance (approximately 30% of the cost) and monthly payments. At the end of the term of the contract, the property again becomes the property of the organization.
The contract is usually concluded for a period of up to 5 years. The amounts of monthly payments depend on the cost of the equipment and its liquidity. The newer and more sought-after asset, the less money you will have to pay as a contribution.
Registration
What is the difference between a loan and a lease? Making a lease is much easier than taking out a loan. In the second case, the client needs to provide a whole package of documents, a deposit and guarantees. The bank spends at least 2-3 weeks on a thorough study of all documents and the client's credit history. Only after that the final decision on issuance of the loan is made.
This is the difference between a loan and a lease.
Literally every enterprise in the framework of its financial and economic activities faces the issue of acquiring fixed assets. Industrial property can be acquired both through commercial or bank lending, and through leasing. Which tool is more profitable to use - leasing or credit, we will consider in this article.
LEASING
According to Art. 2 of Federal Law No. 164-FZ of October 29, 1998 (as amended on July 26, 2017) “On Financial Leasing (Leasing)” (hereinafter Federal Law No. 164-FZ) leasing is a combination of economic and legal relations arising in connection with the implementation of a leasing agreement, including the acquisition of a leased asset.
In accordance with the leasing agreement, the lessor undertakes to acquire ownership of the property indicated by the lessee from the seller specified by him and provide the lessee with this property for a fee for temporary possession and use. The lessor can be either a separate leasing company, that is, a commercial organization that provides leasing services, or act as a seller and lessor in one person.
The subject of the lease agreement there may be any non-consumable things, except for land plots and other natural objects, as well as property that is prohibited by federal laws for free circulation.
Remarks
- The object of leasing transferred for temporary possession and use is the property of the lessor, and the right to own and use it passes to the lessee in full.
- At the end of the term of the leasing agreement, the lessee is obliged to return the object of leasing or acquire it into ownership on the basis of a sale and purchase agreement at a residual value.
- In the case of acquisition and upon expiration of the leasing agreement, the ownership of the leased asset passes from the lessor to the lessee.
Nuances related to lease payments
Lease payments are understood as the total amount of payments under the leasing agreement for the entire period of its validity. This amount includes:
- reimbursement of the lessor's expenses related to the acquisition and transfer of the leased asset to the lessee;
- reimbursement of costs associated with the provision of other services provided for by the leasing agreement;
- lessor's income.
The total amount of the leasing agreement includes redemption price object of leasing, if the agreement provides for the transfer of ownership of the object of leasing to the lessee.
NOTE
The leasing agreement must contain information on the amount, method of implementation and frequency of leasing payments. At the same time, the company's expenses for tax purposes include the full amount of lease payments, and not the amount of overpayment.
It is necessary to pay attention to the accounting of leased property, because the amount of taxes depends on it. According to the Order of the Ministry of Finance of Russia dated February 17, 1997 No. 15 (as amended on January 23, 2001) “On the reflection in accounting of operations under a leasing agreement”, the conditions for placing leased property on the balance sheet of the lessor or lessee are determined by agreement between the parties to the leasing agreement.
It is beneficial for the lessee when the property is accounted for on the balance sheet of the lessor. In this case, the lessee does not pay taxes on it. For the lessee, the cost of the leased asset is recorded either on the off-balance account 001 "Leased fixed assets" (accounting on the balance sheet of the lessor), or on the debit of account 08 "Capital investments", sub-account "Acquisition of individual fixed assets under a leasing agreement" (accounting on the lessee's balance sheet) .
Another feature of acquiring property on lease is the ability to apply accelerated depreciation by a factor of no more than three. Since it is not necessary to apply accelerated depreciation, it is worth specifying in the accounting policy of the enterprise the condition on the use of a special coefficient in relation to the leased asset. Thus, if the lessee takes advantage of the possibility of applying accelerated depreciation, he will reduce the cost of taxes.
According to the Order of the Ministry of Finance of Russia dated October 13, 2003 No. 91n (as amended on December 24, 2010) “On approval of the Guidelines for accounting Fixed Assets” depreciation for fixed assets that are the subject of a financial lease agreement is made by the lessor or lessee, depending on the terms of the agreement. If the property is recorded on the balance sheet of the lessor, the depreciation deductions are made by the lessor, if the property is recorded on the balance sheet of the lessee, the deductions are made by the lessee.
CREDIT
A loan involves the provision of funds by the lender to the borrower, which is formalized by the relevant loan agreement concluded in writing. In case of non-compliance with the written form of the loan agreement, it is invalid.
In accordance with Art. 819 of the Civil Code of the Russian Federation (hereinafter referred to as the Civil Code of the Russian Federation), under a loan agreement, a bank or other credit institution (creditor) undertakes to provide funds (credit) to the borrower in the amount and on the terms stipulated by the agreement, and the borrower undertakes to return the amount of money received and pay interest on it .
To receive funds, the borrower is required to provide a number of documents, including those confirming his solvency and characterizing his financial condition.
NOTE
The lender has the right to refuse to provide the borrower with the loan provided for in the loan agreement in whole or in part if there are circumstances that clearly indicate that the amount provided to the borrower will not be returned on time.
The loan agreement must contain the following main points:
- interest rates on loans;
- the cost of banking services and the timing of their implementation;
- terms of processing of payment documents;
- property liability of the parties for breach of contract;
- procedure for terminating the contract.
Remarks
- According to Federal Law No. 395-1 of December 2, 1990 (as amended on July 26, 2017) “On Banks and Banking Activities”, interest rates on a loan are set by a credit institution by agreement with customers.
- A credit institution does not have the right to unilaterally change interest rates on loans and the terms of loan agreements.
To ensure the repayment of loans, banks issue pledge of immovable and movable property. In the case of acquiring property on credit, the collateral is most often the acquired property.
Accounting aspects of accounting for property purchased on credit:
- according to the Tax Code of the Russian Federation (hereinafter referred to as the Tax Code of the Russian Federation), only interest on a loan is included in the expenses of an enterprise to reduce the tax base;
- when acquiring property on credit, there is no possibility of accelerated depreciation, except for cases of its operation in an aggressive environment and (or) in conditions of increased shifts (Article 259.3 of the Tax Code of the Russian Federation).
MAIN DIFFERENCES IN ACQUISITION OF PROPERTY ON CREDIT AND LEASING
Consider the main distinguishing features of the acquisition of property on credit and leasing:
1. Requirements of credit and leasing organizations. To purchase property on credit, you need to collect and prepare a lot of documents (including constituent documents, a business plan, financial statements etc.), while for leasing such a volume of documents is not needed. The buyer's application for a loan is considered for approximately two months, for leasing - a few days.
2. Property rights. When making a loan transaction, the owner is the buyer, the acquired property can be used as collateral for the loan. In the case of acquiring property on lease, the owner is the lessor, however, upon expiration of the lease agreement and payment of all lease payments, the lessee has the right to agree on the purchase of property at the residual value. In this case, the lessee becomes the owner of the property.
Important nuance: even if the lessee is the balance holder, he is still not considered the owner until the acquisition of the property at the residual value.
The leasing agreement may stipulate that at the end of its validity, ownership passes to the recipient (in this case, the residual value is usually 0 or close to this value).
3. Presence of collateral. To apply for a loan, a collateral is required, and property purchased using credit funds can act as collateral. For leasing, a pledge is not needed, since the property already belongs to the lessor by right of ownership (sometimes it is necessary to issue a pledge in leasing transactions, including when accounting for property on the balance sheet of the lessee).
4. Hexistence of an overpayment. In both cases, the buyer overpays, and for leasing, the overpayment is greater. It is clear that it would be more profitable to acquire property at the expense of one's own funds, bypassing a third party.
5. Othe inclusion of costs in the composition of the expenses of the enterprise for the purpose of taxation. In a loan transaction, only the interest on the loan is included in the expenses, in contrast to the possibility to attribute all lease payments to expenses in the case of acquiring property on lease.
6. Depreciation. When purchasing property on lease, the buyer has the right to apply accelerated depreciation and reduce income tax expenses. For property acquired at the expense of a loan, the legislation does not provide for any features of the application of depreciation. As in any other case, accelerated depreciation is possible when this property is used in an aggressive environment and (or) in conditions of increased shifts.
7. Payment of property tax and VAT. Property purchased on credit is subject to property tax. In the case of leasing, the lessee does not pay property tax during the entire term of the leasing agreement, since the lessor is the owner of the property. After the redemption of the property, the tax will be paid on its residual value.
Leasing payments are subject to value added tax, payments on loans are not subject to VAT. If the company-buyer pays VAT, then it has the right to present the tax paid for offset; if the company operates under a simplified taxation scheme and is exempt from paying VAT, then the costs increase.
Despite the fact that lease payments are usually higher than loan payments, leasing is considered the most profitable transaction for legal entities due to the possibility of reducing the tax base and the special conditions provided for by Federal Law No. 164-FZ. In general, economically favorable conditions for leasing transactions are directly related to the policy of the Government of the Russian Federation on the development of financial leasing in the country.
A. N. Dubonosova, Deputy Managing Director for Economics and Finance
The material is published in part. You can read it in full in the magazine.
Every day, in order to develop a business, entrepreneurs are forced to look for effective ways to solve their problems. Leasing has long been an alternative to bank loans. Many people ask themselves questions, what is more profitable - leasing or credit, what to choose? To answer this question, let's analyze credit and leasing relations using comparative characteristics.
What to choose from
As is known from the course of economics, demand generates supply, and in the case of leasing, both parties benefit - and the car dealer increases sales, and business representatives get the opportunity to turn their plans into reality. Although, if you look, there are no special fundamental differences between and auto leasing. The presented financial instruments in both cases provide for the existence of monthly installments for the car and payment down payment when making a deal.
If we compare leasing with a loan, then we can say with confidence that in this transaction all the financial risks of the lessee are as follows:
- until the final payment, the property is owned by the leasing company and in case of violation of contractual relations it can be withdrawn;
- the leasing agreement provides for conditions under which the received transport cannot be subleased.
At the same time, a significant disadvantage for the owner of motor transport (the lessor) is the amount of payments that, as a result of the transaction, cannot exceed the cost of the car.
Benefits of leasing
Positive aspects for the client when choosing leasing:
- the terms for making a decision and processing a transaction are shorter than in the case of a bank loan;
- the term for which a leasing agreement is concluded is longer than that of financial and credit organizations;
- a different scheme of repayment of leasing payments is envisaged - companies are ready to meet the needs of their customers and take into account all factors of the financial flows of the lessee;
- all expenses for payment of customs duties and insurance procedures are covered by the leasing company;
- no need to pay property tax;
- the lessee retains the right to exchange the car, as well as to terminate the contract and return the vehicle.
As you can see, the difference between leasing and a loan is that in the first case, you are provided with a range of services (financing for the purchase of a car, registration and insurance of a vehicle, technical inspection and round-the-clock technical support). Also, the leasing company is ready to independently resolve all issues with the insurance company in the event of an accident, however, if the insured refuses to compensate insured event all costs are borne by the lessee.
When lending, the borrower is given only funds for the purchase of a car, and all other costs are borne by the client. At the same time, in the case of lending, the customer is the owner of the car, and the vehicle is only provided to them as a pledge to the bank until the loan obligations are fully repaid. When leasing a car, it is provided for temporary use until the full payment of payments, and only after that the vehicle is re-registered to the lessee.
Leasing for a legal entity
It should be noted that financial leasing is beneficial only to legal entities that use the general taxation system. There will be no privileges for companies on the simplified tax system and UTII, but for individuals, car leasing will cost more than a loan. Continuing the topic of how a loan differs from leasing, let's focus on the following aspects:
- firstly, banks have much stricter requirements for the borrower in the case of a transaction for the purchase of a car;
- secondly, the transaction cannot be included in the balance as costs;
- thirdly, the amounts for the repayment of interest must be paid from the profit received by the lessee.
In order to understand in more detail what is better, a loan or leasing, let's consider a specific example with the dynamics of costs. Let's calculate the purchase of a car with the help of a leasing company for a legal entity that pays taxes at the general rate. We take as a basis the cost of a car in the amount of 3 million 100 thousand rubles, the amount of a loan in the amount of 2480 thousand rubles for a period of 3 years and an interest rate of 16.5% per annum. We also take into account the accelerated amortization period for 36 months and the repayment of the debt in monthly equal installments. Let's not forget about the initial contribution from our own funds in the amount of 20%.
In the course of simple arithmetic calculations, we get:
- due to accelerated depreciation, savings over 36 months will amount to 666 thousand rubles;
- since property tax is included in lease payments, and they are taken into account when refunding VAT, the total reduction in the taxable base will be 614 thousand rubles.
We will try to slightly change the conditions for the purchase of vehicles and instead of leasing, we will give preference to bank lending. We will leave the main parameters of the transaction at the same level, only change the interest rate downward from 16.5% to 12% per annum. We will add a one-time bank commission for issuing a loan in the amount of 1% and increase the amortization period to 84 months.
Applying , this is what happens:
- due to the fact that transport is purchased on credit, the taxable base of the enterprise for VAT will decrease by 473 thousand rubles;
- as a tax on the property of the organization, it will be necessary to pay 302 thousand rubles to the budget;
- in terms of income tax, positive dynamics will be observed within 3 years and in just 36 months the savings will amount to 377 thousand rubles.
For clarity, we will place the final results in a pivot table:
| No. p / p | Leasing, thousand rubles | Credit, thousand rubles | |
|---|---|---|---|
| 1 | Principal amount of the transaction | 3100 | 3100 |
| 2 | Down payment amount | 0.2 | 0.2 |
| 3 | Amount of own funds | 620 | 6 |
| 4 | Transaction interest rate | 0.162 | 0.12 |
| 5 | Overpayment amount | 926 | 683 |
| 6 | The amount of income tax savings | 666 | 377 |
| 7 | Amount of VAT refund | 614 | 473 |
| 8 | Property tax | 0 | 302 |
| 9 | The total cost of the enterprise (1+5-6-7+8) | 2746 | 3235 |
As you can see, in this case, the advantages of leasing over a loan are obvious, since an enterprise can save money in the amount of 489 thousand rubles.
Is leasing beneficial for an individual?
Availability of vehicles in modern world has become an indispensable business need. Every third person decides to purchase a vehicle using borrowed funds, and here it is important to take into account the differences between leasing and credit.
Let's take a 2014 Toyota Corolla sedan with an engine power of 1.6 and a market value of 690,000 rubles for calculation. The loan term under our deal will be 3 years with an interest rate of 15% per annum, an initial payment of 20% and even repayment of the debt on the loan. Differences in leasing conditions will be the absence of an interest rate, since the car can be returned.
| No. p / p | The main characteristics of the transaction | Leasing, thousand rubles | Credit, thousand rubles |
|---|---|---|---|
| 1 | 2 | 3 | 4 |
| 1 | Principal amount of the transaction | 690 | 690 |
| 2 | Down payment amount | 0.2 | 0.2 |
| 3 | Amount of own funds | 138 | 138 |
| 4 | Transaction interest rate | 0.15 | 0 |
| 5 | Monthly repayment scheme | Equal payments | |
| 6 | Term | 36 months | |
| 7 | Monthly payment amount | 19.135 | 11,790 |
| 8 | Interest payment amount | 135 | 0 |
| 9 | Total amount of payments (7х6+3) | 826 | 562,440 |
| 10 | Advance redemption payment | 0 | 441 |
| 11 | General expenses for acquisition of property (9+10) | 826 | 1 033,440 |
As a result, we see two scenarios. In the first case, if an individual plans to use vehicles on a temporary lease when concluding a transaction, the savings compared to a loan will amount to 263,560 rubles. In the second case, if the lessee wishes to fully redeem the vehicle, the price increase under the transaction will be about 207,440 rubles.
Loan or leasing? Advantages and disadvantages: Video