Company car? Better leasing than credit for a start

Service Business

Operating leasing and a bank loan are currently the two most popular methods of financing the purchase of vehicles by entrepreneurs. Despite the differences in costs between them, they do not determine the advantage of leasing. Due to the great popularity of these two forms of financing, it is worth presenting their advantages and disadvantages, especially for companies that are just starting their business.

Bank credit

Before granting a loan, the bank carefully checks the creditworthiness of the company applying for it. It has been assumed that cash is reluctantly lent to those entities that have been operating on the market for less than two years. Additionally, low profits are what may disqualify an entrepreneur on the way to a bank loan.

Despite the difficulties with formalities, a bank loan has a number of advantages. First of all, when a company buys a car on credit, it immediately becomes the owner of the vehicle. In addition, the receivables on this account can be repaid earlier than provided for in the contract - companies adjust installments to their financial capabilities. An undoubted advantage is also the fact that it does not matter for the bank in what condition the car is bought (new or used).

Operating lease

In terms of formalities, leasing companies are much less restrictive than banks. They do not check the company's creditworthiness as thoroughly as they do with a bank loan. In addition, they are willing to grant a leasing loan to entrepreneurs, regardless of the time of their business activity.

When using leasing, the entrepreneur does not have to worry about the registration of the car or its insurance - these are the issues that the lessor cares about.

What speaks in favor of this form of financing is the settlement with the tax office. The entire net rent and expenses incurred for the use of the car are included in tax deductible costs.

Unfortunately, in some cases leasing is less beneficial for entrepreneurs. For example - not every leasing company will decide to grant a loan for a used car (the owner of the vehicle is the leasing company and in the event of the borrower's insolvency, it may have problems selling the used car). In addition, the entrepreneur may have difficulty in recovering money from the car insurer - in the event of, for example, a breakdown, the owner, i.e. the leasing company, is entitled to compensation. The user of the vehicle will receive funds for the repair of the damaged vehicle only after sending the appropriate letter.