Lease vs Loan

1. Cost-Effectiveness

There is a common stereotype among many customers that lease interest rate is always higher than a bank`s loan rate therefore lease being more costly.

In fact, both banks and lease companies provide financing to their customers under the same terms and conditions (funds are the same product having its market value). Lease companies seeking bank loans to finance operations thereof are like wholesale customers to the banks (lease companies draw credit lines to the value of tens, even hundreds of mln UAH). Accordingly, they are financed at considerable discounts compared to market rates. Such discounts allow lease companies to conduct dealings under the same market terms and conditions as banks, in some cases such terms being even more favorable.

Conclusion: lease rates are usually equal to bank loan rates and sometimes may be even more favorable.

2. Settlement Transparency

Sometimes to get an objective view of the actual loan payments to be made one has to spend considerable time to collect and analyze additional information. Often banks resort to various marketing tools to lower interest rate by introducing additional payments to attract customers. These can be miscellaneous single-time and monthly fees, KASKO and OSAGO insurance through accredited insurance companies at overpriced rates throughout the loan term, insurance of life for individuals, etc.

Lease companies provide information in a comprehensive and transparent way: advance payment and monthly lease payment. There are no other expenses.

Conclusion: lease settlement is by far more comprehensive and transparent for the customer compared to bank`s loan.

3. Financing in Foreign Currency

Currently only leasing companies have an opportunity to provide finance lease deals in foreign currency at corresponding interest rates. Banks are not entitled to provide loan in foreign currency to individuals (in national currency only), while there are so many limitations with regard to legal entities that it is next to impossible to get a loan in foreign currency. The existing difference between UAH vs foreign currency loan interest rates (around 10-12% per annum) makes lease more attractive cost-efficiency-wise compared to bank lending, especially for a short term from 12 to 24 months.

Conclusion: lease provides additional financing opportunities that bank lending can`t.

4. Financing Approval Time, Customer Requirements

As the property right to leased item is not transferred to the customer, lease companies have mitigated requirements in terms of proof of the customer`s funds compared to banks. Normally this is a shorter and simpler list of documents required for the decisioning regarding finance provision within shorter terms (1 to 5 days), whereas it takes way longer for banks (up till one month for legal entities).

Conclusion: lease companies have quicker decision-making thus saving the customer`s time and resources at this stage.

5. Flexibility and Customer Centricity

In view of structural specificity, lease companies are more flexible and customer-oriented in terms of decision-making, differing from

standard programs and operating procedures of banks. Probability to agree upon specific terms and conditions of lease for a separate customer (for example, to establish a 18.5% advance payment instead of the minimal 20%) is way higher than altering a bank`s loan program for a specific customer.

Conclusion: the customer has more opportunities with lease companies to receive financing maximally tailored to the customer`s needs and resources.

6. Comfort Maintenance and Value-Added Services

Lease company undertakes a substantial part of functions normally performed by the customer under bank loan, requiring the customer`s time, money and sometimes nerves. Such functions include: registration and payment of respective taxes and DMV fees, add-on accessories of the leased item, insurance and settlement of insured events, technical assistance, service maintenance, fuel cards, GPS services, etc.

Conclusion: Lease company experts help save the customer`s time and resources, performing part of the

7. Interest-Free Lending

When estimating lease payments, a part of expenses to be promptly settled by the customer under regular purchase is broken down by equal interest-free installments for the whole period of lease. Such expenses normally include DMV registration, pension fund fees, KASKO and OSAGO insurance, routine scheduled maintenance as per reconciled mileage, etc.

Conclusion:lease allows for additional opportunities to optimize expense calendar and improve money flow.