Car leasing vs car title loan: which is more profitable
Today, on average, there are almost 300 cars per thousand people. And the demand for buying new cars is growing. Someone buys a vehicle immediately, someone on credit, there is also a less popular option for acquiring a car, which is more often used by legal entities – leasing. “EV” decided to find out the pros and cons of these tools.
car title loans and car leasing are convenient tools for purchasing vehicles. They are used by different categories of clients. car title loans are preferred mainly by individuals, including through state programs to support car title loans. The loan is issued by the bank specifically for the purchase of a car, while the vehicle will remain pledged by the bank until the entire loan amount is paid in full.
This means that the car cannot be sold, donated, or exchanged until the loan is repaid since in the event of termination of monthly payments, the car dealer or bank can take the car as a forfeit.
On the one hand, you don’t have to save money for a car for years, but buy a car at any time. On the other hand, a loan for a large amount is not approved by everyone. Also, the terms of the procedure for drawing up a loan agreement are quite complex,
Many are also stopped by the fact that the total cost of a car increases significantly due to credit interest, and the obligatory annual circular car insurance prescribed by the bank is a serious burden on both the family budget and the enterprise budget.
Currently, several state programs in our country allow legal entities to purchase a car on lease on preferential terms, Leasing companies also cooperate with various car manufacturers, providing customers with additional discounts.
The main difference between a car title loan and leasing is in the target consumer: loan products are mainly aimed at individuals. “The advantages of car title loans are interesting rates and a wide range of banking programs. In terms of requirements for borrowers, conditions are being liberalized.
Another reason for choosing a car title loan is the ability of the client to choose the most suitable program for himself: lending a new or used car, a program with a residual payment. Among the advantages of a car title loan, one can also note the presence of government subsidies: the opportunity to get a good discount on a vehicle within the framework of special programs offered by banks.
The car leasing scheme, in comparison with the car lending scheme, seems to be simpler. Leasing is the purchase and transfer of a vehicle for temporary possession and use for a set fee.
A person comes to a company that provides such services, explains what kind of car he needs, and concludes a contract. Now he is a lessee, for whom the lessor buys the necessary car and transfers it for personal use.
It is clear that the owner of the vehicle is the company in which the lease was arranged, the same company is also involved in the registration of the car and technical inspection. The lessee is left with monthly payments, which, by the way, as a rule, are less than the loan payments – because they are calculated without taking into account the residual value. Residual value is the amount
So, among the advantages of leasing, one can single out the fact that the lessor himself takes care of all the technical worries about the car. Also, it is easier for a business to use leasing than a loan: no additional guarantees and pledges are required from the lessee – the subject of leasing is itself security for the contract. Requirements for documents for approval of the transaction are also minimal. By the way, there is also state support in the field of leasing.
Another advantage of leasing is that, unlike a car title loan, it allows legal entities to enjoy permanent benefits. First of all, you can legally deal with the optimization of the taxable base for income tax.
It can be reduced because lease payments are fully charged to the company’s prime cost. Leasing also allows not only paying VAT gradually, during the term of the agreement but also subsequently reimbursing the tax from the budget.