Answers to Questions and Misconceptions about Operational Leasing

Operational leasing is not for everyone.

Although individuals can use this service, businesses most commonly choose operational leasing. This is not surprising, especially when considering the numerous advantages operational leasing offers to companies. However, despite what we know about operational leasing, some uncertainties still exist. In the following text, we answer the most common questions and misconceptions that might interest you.

Note that each agency has different terms and policies, so we will focus on standard practice and provide insights into how BizRent offers this service.

1. What is operational leasing, and is it the same as financial leasing?

This often confuses people.

When searching for the term leasing, financial leasing is usually encountered first. There is a difference between operational and financial leasing, so they should not be confused. Operational leasing allows the use of a vehicle for a certain period during which fixed monthly installments are paid. Ownership of the vehicle is not transferred and remains with the leasing company. Financial leasing aims at acquiring ownership of the vehicle, with a long-term contract for vehicle repayment, but ownership is not transferred until the entire contract is fulfilled.

Financial leasing resembles long-term vehicle leasing with a purchase option.

Of course, there is also a difference here because, in classic financial leasing, the user bears the maintenance costs of the vehicle, while with BizRent's long-term rental, everything is covered by the monthly installment.

But let's return to the main question.

Therefore, operational leasing allows the use of a vehicle without acquiring ownership, with an appropriate monthly installment that covers all maintenance costs, servicing, insurance, and others. Operational leasing is usually contracted for 2, 3, or 4 years and can be renewed. In a way, financial leasing is like buying on credit – upon contract completion, the user obtains ownership of the vehicle. Installments are paid according to the vehicle's value, with the first installment usually being 10-30% of the vehicle's value, depending on the leasing provider.

Financial leasing is usually contracted for 3 or more years.

2. Is operational leasing more expensive than buying a vehicle?

It depends.

We wrote about this when comparing purchasing with operational leasing and long-term rental. Each of these options exists for a reason. For companies that need a fleet, investing in buying a larger number of vehicles and then additionally paying costs (maintenance, registration, insurance, etc.) is not worthwhile. This creates a budget imbalance and hinders financial planning.

By partnering with BizRent, companies of all sizes can focus on performing their core activities and avoid purchasing vehicles that will lose value in a few years.

Operational leasing is a practical solution because a fixed monthly installment covers all possible costs – maintenance, servicing, insurance, and vehicle depreciation. Purchasing is more cost-effective if buying a cheaper or used car. In any case, buying involves higher initial costs, while operational leasing is covered by a single fixed monthly installment.

Companies choose operational leasing to focus more easily on their core activities without worrying about vehicle depreciation and maintenance.

3. Can the contract be changed during the operational leasing period?

It depends on the leasing company and the contracts they offer.

Many operational leasing contracts are tailored to the user's needs. This includes changing the number of vehicles in the fleet, adjusting the contract duration, and the option to upgrade vehicles. We understand that businesses are often subject to seasonality. Some need more vehicles in the summer, while in winter, they want to reduce their fleet. This way, we help our clients respond more easily to their customers' needs, increasing revenue and reducing unnecessary costs off-season.

This flexibility is what BizRent operational leasing offers.

4. What happens to the vehicle at the end of the leasing contract?

This is another thing our clients often ask during consultations.

As we explained in the definition of operational leasing – there is no transfer of ownership after the contract. At the end of the operational leasing contract, the user has two options:

1. Return the vehicle to the leasing company and end the cooperation
2. Renew the contract with a new vehicle

Depending on the leasing agency's policy and the terms they offer, it is possible to pre-arrange the vehicle's purchase when the contract expires, but not every agency offers this. For such cases, long-term rental is usually recommended, as it is intended for that.

5. Does operational leasing have hidden costs?

Does operational leasing hide additional costs that are not obvious when signing the contract?

Transparency is very important when concluding any contract. Monthly installments cover all major costs such as insurance, vehicle maintenance, servicing, and others. The client is informed of all possible additional costs that may arise, such as exceeding the contracted mileage or damage beyond normal wear and tear. Conditions may vary with each agency, and the vehicle's model and age also play a role.

As for BizRent's offer, all costs are clearly stated in the contract, including regular maintenance and insurance. As long as the contract lasts, there are no unexpected costs if all contract conditions are respected.

How does BizRent charge for exceeding the annual mileage?

BizRent offers several options.

Limits vary depending on the engine type. For vehicles with diesel engines, the options are 15, 30, 45, and 60 thousand kilometers per year. For vehicles with gasoline engines, the options are 20, 40, and 60 thousand kilometers per year. In case this mileage is exceeded, each additional kilometer is charged.

The charge for additional kilometers is 0.15 euros per kilometer.

6. How does operational leasing affect taxes?

Does operational leasing really bring significant tax benefits for companies?

We wrote about how to take advantage of operational leasing. If you have read it, you know that the costs for paying operational leasing are treated as business expenses, which can reduce the company's tax base. This allows companies to optimize their tax obligations and better plan their finances.

As they say, win-win.

7. Does operational leasing have flexible cancellation terms?

Are operational leasing contracts difficult to terminate?

The truth is that complications can arise when terminating the contract if there are disagreements or non-compliance. This mainly depends on the specific terms of the signed contract. Operational leasing often offers a certain level of flexibility in cancellation terms, but this can vary.

What does this mean?

This means that operational leasing contracts include penalties for termination before the contract expires. Reasons for termination can vary, but the most common is the inability to pay monthly installments. However, it is important to understand that leasing companies bear a huge financial risk of vehicle ownership, so it is normal for contracts to be structured to minimize their losses due to early termination.

However, exceptions exist.

Some leasing companies offer adjustable contracts that allow users to change terms during the leasing period, including options for extension, shortening, or changing the number of vehicles in the fleet. Such companies offer contract termination options with minimal or no penalties under certain conditions.

These conditions may include:

• Minimum usage period: If the vehicle has been used for at least 24 months in a three-year contract, termination can be more favorable.
• Business changes: Changes in the user's business, such as seasonal needs or reorganization, can allow for more flexible termination.
• Good vehicle condition: If the vehicle is in good condition and has not exceeded the contracted mileage, termination can be easier.
• Positive relationship with the leasing company: Long-term and positive relationships with the leasing company can result in more favorable termination terms.
• Contract replacement: Taking a new contract for another vehicle from the leasing company's offer can facilitate the termination of the previous contract.

These conditions can vary depending on the leasing company, so it is important to thoroughly review the contract terms before signing. In conclusion, while some contracts may be difficult to terminate, some options provide greater flexibility, depending on the leasing company and specific contract terms.

What is BizRent's policy before signing the contract?

To prevent unpleasant situations, users go through a KYC (Know Your Customer) or KYB (Know Your Business) protocol before partnering with us, establishing the financial background and trust with the user.

The rental period is also flexible.

BizRent's rental period offers multiple options tailored to the demands and preferences of each user. One can choose a leasing period of 24, 36, or 48 months, depending on each client's long-term plans and budget.

Looking for transparent operational leasing terms?

With BizRent's vehicle offer and transparent operational leasing, we are confident you will be satisfied! 

Contact us today and find out how BizRent can help your business thrive while we take care of your fleet! Our team of experts will help you make the most of all the benefits of this service.

P.S. If we didn’t answer all of your questions, feel free to reach out.