Lease vs Purchase

1. Cost-Effectiveness

Own-funds buyers tend to resort to a sole argument supportive of their choice - “Lease is more costly than purchase, appreciation ratio is very high”. Thereby lease item cost and total lease payments, advance payment included, are typically used for comparison.

This comparison does not account for nondiscretionary costs invariably incurred by the customer, even when making an own-funds purchase, though such costs are included in lease payments estimate. For example, with a car as a leased item, such expenses include: vehicle registration, transportation tax, pension fund (3-5%), add-on accessories (antitheft alarm, winter tires, etc), annual motor insurance by KASKO and OSAGO.

Furthermore, the customer seldom accounts for additional income opportunities derived from the funds saved by virtue of lease, using them as a bank deposit or operating assets for business development purposes.

Conclusion: proper economic assessment suggests that lease appreciation ratio versus own-funds purchase is rather slight and sometimes by virtue of special lease programs total lease payments may be lower than total costs of an own-funds purchase.

2. Taxation Benefits

This section is for entities and individuals (sole proprietors).

Financial lease scheme allows for VAT return as per total leased item value regardless of advance payment amount (in some cases it constitutes 0%). This can substantially improve the customer`s money flow.

All lease payments account for gross expenditures and therefore reduce taxable income as such.

Conclusion: lease allows for additional taxation benefits compared to own-funds purchase as per applicable law.

3. Comfort Maintenance and Value-Added Services

Lease company undertakes a substantial part of functions normally performed by the customer under regular purchase, 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 functions on the professional level and ensuring the customer`s comfort.

4. 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.