The main difference between operating and financial lease , in the case of the first, the fee covers the use of the vehicle and all its costs associated with maintenance, since it is a rental. In the case of financial leasing, it is an available vehicle credit alternative,that is governed by a contract concluded by a bank or financial institution. Under this contract the risks and benefits derived from the property are transferred, meaning that, the customer must bear all costs related to the maintenance of the vehicle, and at the end of the contract will be able to access the purchase option of the same.
On the other hand, if we compare operating lease against the purchase of the vehicle, we will see that the first:
- Avoid everything related to financing interest.
- It does not assume currency inflation in the leasing time period (which could happen with financing).
- By not requiring capital investment or altering borrowing capacity, it gives the opportunity to invest in the core of the business or trading strategies.
- Since it’s a lease, it is deductible from income tax, because it is not recorded within the company’s assets.
Now, you’re sure to wonder, what is the best option? And that question has many answers; what we recommend is to be clear about the purpose that the vehicle or fleet of vehicles will fulfill, depending on the needs your company has. Once you know this, you will be able to identify the pros and cons of each modality.
Finally, if you are aware that the vehicle is vital to meet your transportation or business operation’s needs, renting or operating lease could be the most effective solution. If you still have questions about your benefits, do not hesitate to contact us so that one of our business advisors can help you.