What is the difference between a loan and leasing? Leasing advantage

Why save up money for a vehicle for many years, if you can quickly become a car owner by issuing a lease or a loan? In both cases, you will have to conclude an agreement with the bank, leave the property as collateral and pay interest on the use of money. What is the difference between a loan and leasing?

Essence

A loan is a special-purpose loan that is issued for a certain period with specific conditions. The client returns the amount of money to the bank, taking into account interest. The service can be issued by enterprises, citizens of the Russian Federation and foreigners who have regular income in Russia. The difference between leasing and credit is that in the second case there is a lease with the right to purchase. The Bank acquires and transfers to the client for use the subject of the transaction, which remains the property of the financial institution until all the conditions of the contract are fulfilled. The buyer does not participate in the calculations with the seller. Here, briefly, what is the difference between a loan and leasing.

History of development

In the 80s in Russia, financial leases were used in foreign trade operations when purchasing equipment. In particular, under such conditions, Aeroflot acquired European airbuses. In the 90s, the first companies began to form: Aerolizing, Rosstankininstrument, Leasingugol, Rosagrosnab, which existed at the expense of budget funds. In 1994, the Rosleasing Association appeared to coordinate activities and protect the property interests of participants. At the legislative level, operations began to be regulated only when the law “On the Development of Leasing in Investment Activities” came into force and the Civil Code was amended.

The difference between leasing and credit

For a better perception, we decided to present these differences in a table.

The key advantage of leasing from a loan is that for small volumes of transactions, a transaction can be executed without collateral. In any case, banks will require a money back guarantee. Most often, the value of the collateral is several times the size of the loan. For small businesses, this is becoming a big problem. The bank will not complete the transaction until it is convinced of the solvency of the client. A positive decision on leasing can be obtained even with negative financial indicators.

Cost-effectiveness

What is the difference between a loan and leasing for legal entities? Finance rentals save time and money. The bank considers an application for processing a transaction on average five business days, and then makes a decision. If it is positive, then the client signs a leasing and sale contract for the object. In addition, all payments relate to the cost of property.

With credit, the situation is different. To apply, organizations need to collect a large package of documents to confirm their solvency, and draw up a business plan. After that, the bank carefully examines the credit history, the volume of assets and liabilities, the availability of collateral and collateral. After that, documents are drawn up. This process takes an average of one month.

Financing

When making a lease, the client pays an advance and insurance payment. In the case of a loan, it is additionally necessary to finance a bank commission for processing a transaction, currency conversion, if the equipment is purchased from a foreign counterparty, notary services. The difference between leasing and credit for individuals is that a financial lease exempts the client from paying the transport fee and services such as registration with the traffic police. All these costs are paid by the company that executes the transaction. In the future, the client compensates the bank for all expenses. The average lease term is three years.

freedom of choice

In a credit transaction, the client independently searches for the seller, selects the object (car, equipment, apartment), and then applies to the bank for a loan. A financial institution pays a fee, and the borrower then repays the debt with interest. The problem is that banks do not always cooperate with companies that are of interest to the buyer. For example, a VTB client wants to get a car loan to buy a Honda, but a financial institution may not cooperate with this dealer. He will have to either look for another car, or arrange a service in another bank. In the case of leasing, the intermediary company is engaged in the search for the desired object according to customer requirements. She carries out a purchase and sale transaction. Then the object is transferred for temporary use to the client. This is the difference between a loan and leasing.

Property rights

Consider this item on the example of buying a car. When applying for a loan, the vehicle becomes the property of the bank. He is a guarantee. In the case of leasing, the transaction object is transferred to the borrower only after all payments have been paid, and before that it remains the property of the company. What is the difference between leasing and car loans? An intermediary company deals with all matters related to property insurance. Some banks give loans without hull insurance, but at the same time increase the interest rate and down payment (up to 40%).

Both types of transaction require an advance payment. But if, when applying for a car loan, it’s enough to make 10-20% of the amount, then in the case of leasing, the higher the down payment, the better. It is not profitable for a bank to complete a deal at 50% of the cost of a car. An intermediary company may consider a client to be insolvent if he can make only 20-30% of the cost of the car. Here is the difference between leasing and car loans.

Interest rates

Depending on the chosen credit policy, cash remuneration may be calculated based on the initial or residual amount. Most often, the second method is used. If interest is charged on the original amount, then the overpayment is two times the amount of the loan. There are few people wishing to arrange a loan under such conditions.

The interest rate includes fees for financial resources, administrative costs, rate of return and risk coverage. Each financial institution calculates its value independently, depending on the interbank market, financial indicators of the company, and loan structure.

Business Benefits

Earlier it was said that leasing helps save money. All payments can be paid in kind, that is, products that are manufactured by equipment purchased on a finance lease. The contract may provide for additional work. What is the difference between a loan and leasing, if the subject of the transaction is an operating system, discussed below.

Borrowers note high customs duties on imported equipment, a small number of intermediary companies, and a limited range of products that can be issued on a finance lease. That's the difference between leasing and credit.

What is more profitable for enterprises and individuals?

The financial rental service is available to everyone. But, due to the availability of the opportunity to reduce the base for calculating property tax, leasing is more profitable to issue to individual entrepreneurs and legal entities. Ordinary consumers can purchase goods on credit. This allows you to plan your costs in advance, attract co-borrowers, guarantors.

Example

The difference between leasing and credit and leasing is that the subject of the transaction is a specific subject that the client can redeem. Only after paying off the residual value does it become the property of the borrower. If the client does not want to use the item in the future (equipment, vehicle, etc.), he must pre-arrange the leaseback service. Its essence lies in the fact that at the end of the contract, the borrower presents the subject of the transaction back to the bank. But such an operation is not beneficial to the client.

The client wants to buy a Toyota Corolla car for 690 thousand rubles. Typical conditions:

• Advance payment - 20%, i.e. 193.8 thousand rubles.
• The term is 36 months.
• The rate is 15%.
• Costs for CTP, CASCO, vehicle registration are not included in the contract price. The client pays for them independently.

The monthly payment on leaseback is 7345 rubles less than on a loan. In this case, at the end of the contract validity period, the assistant will not receive ownership of the car. Even if the vehicle is purchased on the basis of subsequent redemption, it is better for individuals to get a car loan. Then the sum of all expenses will amount to 826 thousand rubles.