- First of all, it is important to know how do you plan to use the leasing service – as a company or as an individual. For corporate entities, the open end leasing carries undoubtedly some tax benefits. For individuals, they are insignificant if existing at all.
- If you use leasing as a company, you may need to take into consideration the balance sheet implications – the question here will be whether you would like to have the on your balance sheet /closed-end leasing/ or would rather have fewer long-term assets on you BS and only carry the expenses for their use /open end leasing/.
- An important difference between the two forms of is the ownership of the after the end of the leasing term. So if the answer to the question - Do you want to acquire full ownership of the leased asset after the leasing term? is Yes then the closed end leasing should be your choice. And in the event that the ownership is less important than the utilization of the , then the open end leasing will be more appropriate.
- Last but not least come the budget considerations. Due to the The residual value is present in... More inherent in the open end leasing, its monthly installments /all other terms equal/ will be lower than those of a closed-end lease. Therefore, should the budget for monthly installments be smaller, then the open end leasing will prove better.
- In conclusion, we may say that the open end leasing is more suitable for corporate lessees, who practice tax planning, have a limited monthly budget for leasing installments and do not appreciate full ownership of the after the leasing term. For the remaining lessees, the closed end leasing will be more appropriate.
- Very often, upon choosing the asset, which you would like to acquire, the vendor of the equipment will suggest a with which they have an ongoing partnership. With the captive , this will be compulsory. It is usually not necessary to listen to the suggestions of the vendor, but this will shorten the time necessary for you to find the appropriate .
- In the ideal case, it will be perfect if you are able to acquire several leasing offers for the required asset from many lessors and choose the best one. Often this will be hard to accomplish. Therefore read on further.
- It is important to know that each has some specific target. Some are specialized in leasing vehicles, others of industrial equipment, third – of agricultural equipment. Specialization exists in the preferred leasing type by the – some focus ton , while others prefer operational leasing. Specialization exists also in the target lessees – some service corporate bodies and some are specialized in servicing individuals. In choosing a it is good to keep in mind their specialization. There is not much use in us requiring an improvement of the leasing offer if we are not in “the target customer group” of the .
- If you are acquiring the first machine for the equipment of a whole plant, it is reasonable to focus on the bigger . One of them may become your strategic partner, supporting you in the years to come and in the acquisition of each following machine and equipment, without paying heed to the total amount of your requirements (provided your credit rating is sufficient). Discuss with your new partner your future leasing needs and the capabilities of the .
- If you are looking for full-service operational leasing, your selection will be limited to but a few companies (in Bulgaria). Their reputation for the services they provide will be important for your decision – service, reserve vehicle, tires, etc.
- One of the easy ways for choosing your could be his history. The logic is that the older the administration will be cleared from defects over the years. As a potential , you are likely to have intensive interaction with the administration of your and it would be advisable to communicate and depend on experts.
- Last, but not least, is the price of the leasing service. As a rule, the bank use relatively cheaper financial resources and respectively may offer lower leasing interest to their clients.
- On the other side, the „Captive Leasing Company is a company... More” have the capability of offering various “promotions” to their clients, as they are subsidized by the mother company.
- As sad as it may sound, for certain asset you will not have much choice. Such is the case with used cars, especially older than 5-6 years from first registration. Your aim in such cases will be to find a which is willing to finance such a deal. Your choice will also be limited, should the credit history of the be marked with previous defaults in the Central Credit Register from prior credits and leasing contracts.
It very much depends on the profile of the – normally the rates for individuals are the highest, followed by SMEs and the lowest interest rates used by large corporates. This interest rate distribution follows the risk of the to some extent. The interest rate may also be influenced by the type of – the more liquid the asset the lower the interest rate. It is also of importance whether the interest rate is fixed or floating. The fixed interest rate is normally better for the , however, it will carry a small premium.
With all that said, we need to mention the various economic cycles of the market, which carry different interest rates with them. Currently, interest rates are rather low and an average mid-risk will enjoy an interest rate of 6% p.a.
Do not forget that further to the interest rate the lessees need to be aware of the Annual Percent of Expenses or the APE – with some lessors the various fees and taxes have a great weight in the APE, sometimes even exceeding that of the leasing interest.
The average terms, offered by all for cars range from 1 to 6 years, stated in months divisible by 6 - 12, 18, 24, etc. The tenor is usually selected by the . The shorter term will carry higher monthly installments and the reverse – the longer term will have smaller monthly installments. You can experiment with our leasing calculator in order to determine the most appropriate term for you.