Buying a car is still a big expense for many of us. Especially the prices of new cars are dizzy, which is why most people buying them use additional sources of financing. The most popular of them are invariably: car loan and leasing. It is worth knowing what is the difference between these two ways to buy a car and which one is better to choose.
Car leasing – now available to individual customers!
Only a few years ago car leasing was offered in Poland only to companies for which it was profitable also for tax reasons. Therefore, only natural persons who had a registered business activity could benefit from it. Today, some leasing companies, similarly to their counterparts from Western Europe, have expanded their offer to include consumer leasing, i.e. for clients who earn income from paid work.
What is car leasing?
While credit is a way to buy a car, leasing is actually a car use contract. Therefore, the lessor provides the lessee with a car for use for the time specified in the contract. Therefore, the leasing company is the owner of the car throughout the entire contract period, while the lessee is obliged to pay monthly amounts due for using the car (so-called leasing installments). After a certain time, the person using the car can buy it or return it to the leasing company.
Car leasing and special conditions
The person using the car must comply with many of the rules set out in the terms of the leasing contract. She is obliged, among others to properly care for the car, carry out inspections in it and all necessary repairs only at authorized services, as well as pay all insurance premiums (usually, in addition to liability insurance, you also have to pay AC and accident insurance). It is not uncommon for lessors to impose an annual kilometer limit on clients , the exceeding of which is then associated with a certain financial cost (at the end of the contract). Unfortunately, any delay in the payment of even one leasing installment may result in serious consequences, even collection of the car by the leasing company.
What conditions must be met to get a car lease?
In the case of natural persons, car leasing is available only in a few leasing companies and each of them has, in fact, slightly different requirements regarding the possibility of using the service. Usually, however, you need to submit a set of documents similar to when you take a bank loan, i.e.
- ID card
- certificate of employment and income
- possibly bank statements
- any documents regarding the guarantor
It should be remembered that an initial payment is required for leasing, e.g. 10% of the value of the car. The amount of leasing installments depends partly on the amount of the initial payment and partly on the option to buy:
- leasing with low purchase – these are higher leasing installments, but the low amount of purchase of the car is owned
- leasing with high buy-out – these are low leasing installments, but a high buy-out amount
The detailed leasing conditions depend largely on the type of car being leased. It is worth remembering that leasing companies allow leasing of new and used cars.
Car loan – what options are available?
If you want to buy a car for a loan, you can really use different solutions – take a targeted car loan or cash loan for any purpose.
Car loan is offered by banks (not all) and its characteristics are:
- has a lower interest rate than a normal cash loan for any purpose
- the car is a collateral for the loan, so until the end of the contract (until the loan is repaid) the owner or co-owner of the car is the bank that is included in the car’s registration certificate
- it can usually be taken on a new car, and if used, it is usually not older than 10 years
Cash loans for any purpose are distinguished by the following features:
- is more expensive than a car loan
- the borrowed funds can be used freely, and the car does not become a collateral for the loan (the bank is not included in the registration certificate)
- with higher loan amounts, banks usually require collateral or a surety
Both of the above solutions have their advantages and disadvantages, but certainly, if you want to take a cheap car loan, it is better to choose a special-purpose loan offer, where the car is the collateral.
Which is better – credit or leasing?
For many people, car leasing seems more advantageous than a loan because it is easier to get one. When leasing, the customer’s creditworthiness is not as thoroughly tested as in banks, which is why even people with negative BIK entries have the chance to lease a car. Only people with stable financial standing who do not have serious arrears in paying other liabilities can count on a bank loan. In other respects, leasing and car loan are similar – in both cases installments should be paid monthly, in both cases late payment threatens to lose the car, and finally with both forms of financing at the end of the contract you can become the owner of the car – in the case of credit, however automatically with the payment of the last installment for the car, while in the case of leasing it is still necessary to pay the car purchase costs.