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If you are looking for an alternative to buying your own car, you have several options. In addition to short-term rental, there is operating lease and classic financial lease. Let's look at the difference between them and when each pays off for you.
When deciding between an operating lease and a financial lease, you should primarily consider your needs, financial situation, and long-term goals. How much money do you currently have available? How much care do you intend to give the car? Do you want to deal with all the administration and worries associated with car ownership? And finally – after the contract ends, do you want to keep the same car or would you rather exchange it for a different, perhaps newer model? All of this is crucial for your correct decision between these two very different types of leases.
What is an operating lease?
With an operating lease, the leasing company owns the vehicle. You only rent the car, pay monthly installments for it, but ultimately return it, and it remains the property of the leasing company. You either leave on foot or extend your contract and keep the car (or choose a different one).
Advantages of an operating car lease
The advantage in this case is the tax benefit of an operating lease. It is considered a service, and you can easily include monthly fees in your expenses, thereby reducing your taxes. If you acquire a company fleet on an operating lease, monthly payments can be accounted for as operating expenses. This means they are not included in long-term assets. This can help improve certain financial indicators of the company, such as the debt-to-equity ratio.
Flexible operating lease only from Birne
Flexible operating lease also gives you greater flexibility. After the contract ends, you can swap the car for another and thus drive an almost new car all the time. You can conclude the contract for only two or three years. And with the Flexi tariff from Birne, its duration will depend only on your own decision – you can return or exchange the car even after a few months. This is particularly advantageous for companies that want to regularly renew their fleet and always have modern cars.
What does financial leasing offer?
Financial leasing works differently from operating leasing. You also rent a car for a pre-determined period, but the rules for its use are different. And you are bound by many more obligations to the leasing company.
You must consider in good time that even if you only pay monthly fees during the contract period, you will have to buy the car after it ends. And if you don't have enough of your own funds for it, you will have to borrow, which makes the deal less advantageous. Moreover, the price of the car is determined by the leasing company according to its tables, and you have no influence on it.
For companies, classic leasing can be disadvantageous because monthly payments are usually accounted for as long-term debts on the balance sheet. This is logical because by signing the contract, you commit to buying the car later. However, the presence of these liabilities on the balance sheet can affect the debt-to-equity ratio, which is important when assessing a company's financial health. It is therefore good to consider in good time whether this method of car financing will pay off for you or whether an operating lease will be more advantageous for you.
Financial leasing also tends to be less flexible. If you decide to change cars during the contract period, it is often complicated and sometimes impossible. The same can be true if you want to change the contract duration. In addition, you need to consider that the chosen car will remain yours – so if your business type or family situation changes during the contract period, the chosen car may suddenly become unsuitable.
The decision is yours
Operating and financial leases have their advantages and disadvantages. Before you decide on one of them, carefully weigh all the pros and cons, or ask for a specific price offer from the selected company. For some, classic leasing works better, for others, an operating lease pays off.
At Birne, we also offer a kind of hybrid model – our Try and Buy service offers you a car for six months, and then you can buy it with a significant discount (up to 30 percent). If it doesn't suit you, you simply return it to us. Or you can continue to have it on a classic operating lease.
