What Is Car Leasing?

3 Mins read

Car leasing is a monthly paid rental agreement for a vehicle with subsequent purchase rights. Leasing allows you to gradually acquire ownership of a car. Not everyone has the ability to pay for a car in full at once. Under the leasing agreement, you pay a fixed fee every month, essentially paying for the car in installments. At the end of the leasing term, which depends on the earlier agreements, several options may occur – the car lease may be extended or the car may be returned to the leasing company.

It is important not to confuse car leasing with a bank loan. Car leasing is a complete set of services for acquisition, insurance, technical maintenance, and support, unlike a loan, which is essentially a simple money loan. The requirements for the client in leasing are less strict than in banks, and the conditions for calculating the payment schedule are more flexible. Additionally, the review period for a car leasing application is quicker than for an auto loan.

Advantages And disadvantages Of Car Leasing

The advantages of car leasing for consumers include:

  • the ability to drive a new car;
  • the option to regularly renew the contract;
  • lower monthly costs compared to a loan;
  • a guarantee for the entire duration of the contract;
  • service and maintenance included in the cost;
  • if you are taking the car for your own company, you may receive a good discount.

The disadvantages of car leasing include:

  • the customer does not fully own the car;
  • there is a limit on the mileage agreed upon in the contract (additional mileage will require payment to the leasing company);
  • it is possible to damage the car, for which an additional fee will be required;
  • the cost of leasing may be higher than expected.

As the number of people interested in leasing a car grows, driven by the desire to save money, the market is being flooded with a significant number of fraudsters. You may have heard stories about pseudo-companies disguised as legitimate leasing firms, deceiving people out of their money. To avoid falling victim to such scams, it is essential to follow these rules:

  1. Ask the company manager for a certificate of inclusion in the National Financial Services Committee’s registry.
  2. Carefully read the contract, or preferably, consult a lawyer.
  3. Ask to be included as a third party in the contract between the leasing company and the dealer supplying the object being leased.
  4. Verify the leasing company’s details against open databases. The company should not be listed as a defendant in legal proceedings.
  5. Before signing the contract, compare it to the one you previously read. Both copies should match exactly, with no discrepancies.

Top Tips For Car Leasing Management

To attract customers, many leasing companies use special leasing schemes that take into account all of the users’ preferences. Most often, such schemes include the possibility for the client to independently choose one of the basic calculation schemes, auto insurance, as well as to conclude a preliminary agreement with the company on the minimum set of documents.

If you have decided to open a company providing leasing services, you need to go through the following 5 steps:

  1. Register a legal entity;
  2. Form the authorized capital;
  3. Prepare the documents for the National Financial Institution;
  4. Submit the documents to the NFI and wait for confirmation;
  5. Register the leasing company in a special government monitoring system.

It is important to specify in the contract the restrictions on mileage, damage to the car, the liability of the lessee, the down payment, and the amount of monthly payments. In addition, as the owner of a leasing company, it is necessary to maintain the fleet in proper condition. This is necessary to maintain its profitability and the safety of the drivers. To control their expenses, every leasing company needs vehicle leasing software.

Why Buy Car Leasing Software

Despite the fact that car leasing software is designed to solve a narrow range of special tasks, it can be used by more than one person. Managers, administrators, accountants, logisticians, workers, and customers – the system performs specific functions for each of them. If your company has software for leasing, it will allow you to manage all rental cycles: from booking to invoicing, including accounting and direct debit management.

The set of functions may vary depending on the scale of your company. Among the standard functions are:

  • deal and payment opening and closing schedules;
  • reporting and analytics;
  • control of each vehicle in the fleet, checking them for malfunctions;
  • the ability to manage contracts in just a few clicks;
  • order management, fine handling, and prompt problem-solving;
  • the ability for a client to book a car, which is immediately displayed in the application for managers.

Car leasing software allows you to not only comprehensively manage the fleet but also becomes an effective tool for automating the business processes of your company.

Today, leasing a car is a common practice for European citizens. The service provides customers with a comprehensive solution for transportation, including insurance and maintenance. Taking a car on lease means renting it with the subsequent right to buy it. If you have decided to start your own business providing car leasing services, you first need to carefully study the company registration procedure, pay attention to creating a contract, and select high-quality and professional software.

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