Leasing or leasing with option to purchase, the alternative to buying for a successful business

Rental with option to purchase or long term… It is common nowadays to proceed with the rental of a property, and (almost) everything is commendable. An apartment or a house, a car, equipment or a bike for example. Most of the time, the main reason for this decision is the purchase price, which is much higher than a rental, where the “rent” is more affordable. The second reason for renting is the need, very often punctual, which does not require an investment in a particular product.

Leasing or leasing with option to purchase for goods used occasionally

We can mention, among other things, the rental of ski equipment, used once a year, or a vehicle for a specific trip, outside a metropolis well served by public transport. If the lessor sees his need lengthen, but he is not sure to financially assume the purchase of a property, he can use long-term rental, or even Rental with Option to Purchase (LOA) if he wishes to enjoy this rental longer, or leasing. But what are the differences between these options?

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Renting with option to buy, a “serenity” option

Long-term rental, a relatively expensive choice to buy

The LLD (Long Term Rental) is an option that applies in the context of the rental of a motor vehicle. Tenants who wish to benefit from a car for a longer or shorter period of time can use this option from their car dealership. In this way, for an initial rent, an individual can obtain a vehicle for a period of between 12 and 60 months.

If this allows a good control of his budget, thanks in particular to the staggered payments pre-established at the signing of the contract, the tenant is not the owner of the vehicle. However, he is responsible for all damages and contraventions that occur during the rental. Unlike lease with Option to Purchase, at the end of the contract, the renter does not have the opportunity to acquire the vehicle.

LLD for temporary use

For temporary use, this is a good option. However, in practice, the amount paid at the end of the LLD is often higher than the price of the vehicle as it stands. It is indeed necessary, in addition to the pure rental, to count the insurance costs, the maintenance of the vehicle during the rental and the deposit, collected by the lessor in the event that the property returns damaged.

The signed contract cannot be stopped in advance to change vehicles, unlike other options. The driver must respect the contract, and his clause of imitates authorized mileage. If the tenant goes beyond that, he must pay penalties. Extra costs to insure, then.

It is essential for the client to carefully consider the various options available to him before committing to any contract, according to his budget, the use he must do of the good and his expectations.

Leasing or leasing: leasing with option to purchase, for better management

For individuals, like professionals, the possibility of renting a property for a fixed term, and using it without owning it at first, is an alternative that deserves reflection. For companies, these are usually specific equipment directly related to their business. This may include functional premises, adapted equipment, or vehicles.

The lease with option to purchase allows companies to have lower costs, and thus to be able to lighten their budget each month: by renting items a few hundred euros every month, rather than buying them for thousands of euros, the company saves money and benefits from significant tax advantages. Over a period of generally between 3 and 5 years, the company can therefore keep what property it uses on a daily basis, and can thus change it during its contract if its business has evolved.

Leasing at the service of companies

We call it leasing, or leasing (for businesses). A flexible alternative for businesses and individuals, the LOA allows more freedom for tenants. Indeed, for a person who acquires a vehicle for rent with option to purchase, it is quite possible, throughout his contract, to change vehicles to obtain a newer one and at no extra cost, as long as the returned property is in excellent condition. The contract of a LOA offers different advantages from an LLD property, such as a maintenance package during the rental, which avoids additional costs for the tenant.

The implementation of a leasing offers companies the opportunity to better manage their cash flow and to best support the evolution of their activity. Usually a contract between the tenant company and a bank or a specialized institution, leasing allows a company to equip itself without going into debt.

Better manage your cash flow

Indeed, the objective is to allow French companies to benefit from greater room for manoeuvre. And to be able to benefit from the equipment necessary for the growth of the activity. If a company has to acquire professional vehicles via a LOA, there is no Company Vehicle Tax, nor tax on the rents paid.

From an accounting point of view, leasing is a fixed asset. However, as with Long Term Rental, the company that has contracted the lease does not own the leased property. It is therefore liable for any damage caused during the total duration of the contract.

Companies and individuals are more willing to turn to this type of consumption. This allows them to use a property without going into debt. And to be able to change it more regularly, before the latter becomes obsolete.

Leasing, leasing or long-term rental… Upstream, study all the possibilities and see which one best suits your needs.

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