Which is more profitable - leasing or credit?
Which is more profitable - leasing or credit? I am asking both about the situation when you buy equipment for a company and about the situation when you buy a car. Is it better to lease or take a loan?
2 Answers
Mostly leasing – especially operational leasing. Firstly, the loan is usually more expensive, and secondly, you only include the interest in the costs.
The choice between leasing and credit when purchasing, for example, a car or equipment for a company depends on many factors. Each of these financing options has its advantages and disadvantages, and which is more cost-effective may depend on the individual circumstances of the person or company making the commitment. Here are some things to consider:
Leasing
Advantages:
- Low own contribution: The first payment and monthly installments are usually lower than with a loan.
- Taxes: For companies, leasing can bring tax benefits because leasing installments can often be fully included in tax-deductible costs.
- Flexibility: At the end of the leasing period, you have the option to buy the item, return it, or choose a new one under a new leasing agreement.
- Equipment up-to-date: Leasing allows for more frequent replacement with newer models, which is beneficial, for example, in the case of rapidly advancing technology.
Disadvantages:
- No ownership: During the entire duration of the leasing contract, you do not own the item.
- Limitations: Mileage restrictions and condition requirements may be imposed on the leased item.
- The total cost of: In the long run, the total cost of leasing may exceed the value of the item.
Credit
Advantages:
- Property: After repaying the loan, you become the full owner of the item.
- No restrictions: You have no restrictions on the use of the item, e.g. mileage limit in the case of cars.
- Repayment flexibility: Possibility to repay the loan early, which may reduce interest costs.
Disadvantages:
- Higher own contribution: Typically, a higher own contribution is required than in the case of leasing.
- Installment: Monthly installments may be higher than in the case of leasing, especially if you take out a loan for a shorter period of time.
- Risk of loss of value: Especially in the case of cars, you must take into account the risk of losing the value of the item.
What to choose?
- For companies: Leasing is often more attractive for tax and cash flow reasons, especially if the leased item is used intensively.
- For private persons: A loan may be more advantageous if you plan to own and use the item long-term.
Before you make a decision, it is worth consulting a financial advisor who will help you assess your financial situation, needs and preferences and advise which financing option will be more beneficial for you.
