Operating Lease for Business: Frequently Asked Questions

Considering an operating lease for your company? You probably have many questions and concerns. Is it more expensive than buying? What happens to the vehicle when the lease ends? Are there any hidden costs?

These are just some of the questions our clients frequently ask us. And it's no wonder - although operating leases are becoming increasingly popular among businesses in Serbia, there are still many uncertainties about how they actually work.

In this guide, we'll explain everything you need to know about operating leases. We'll discuss the advantages and disadvantages, compare it with other options, and explain how BizRent approaches this service.

What is an operating lease?

An operating lease is a long-term vehicle rental model where the user pays a fixed monthly fee, while the vehicle remains owned by the leasing company. It's a service that covers complete maintenance, insurance, and servicing of the vehicle throughout the entire period of use.

All costs are included in the monthly fee - from regular maintenance and servicing to registration and insurance. This means you know your exact monthly costs, without any unpleasant surprises.

It's especially popular among businesses as it allows them to maintain a modern and reliable fleet with predictable monthly costs. After the contract expires, which typically lasts 2-4 years, the user can switch to a new vehicle or end the cooperation.

BizRent operating lease

BizRent operating lease is a model adapted to meet the real needs of local businesses. We understand that every business has its unique characteristics, so we've focused on flexibility in providing this service.

What does this mean in practice?

First of all, you can choose the rental period that suits you - 24, 36, or 48 months. Additionally, we understand that many businesses need vehicles only during certain periods of the year. That's why we enable fleet size adjustment according to seasonal needs.

Who takes care of the vehicles?

That's entirely our responsibility. From regular servicing to unexpected repairs, everything is covered by your monthly fee. We work only with authorized service centers and are always available for consultations. You focus on your business, while we take care of your vehicles.

Operating lease vs. financial lease

What's the difference between an operating lease and a financial lease?

Although they sound similar, these are two different ways of using vehicles. With an operating lease, the vehicle remains owned by the leasing company. You pay a monthly fee that covers all costs. The period is shorter, usually 2-4 years, after which you can switch to a new model.

And with a financial lease?

It's more like buying in installments. You pay a down payment at the start (10-30% of the vehicle's value), and after paying all installments, the vehicle becomes yours. The repayment period is minimum 3 years, but you bear all maintenance and servicing costs.

Why do businesses choose operating leases then?

Because it allows them to have a modern and reliable fleet without major investments and maintenance concerns. Plus, everything is predictable through fixed monthly fees.

Is an operating lease more expensive than buying a vehicle?

It depends.

We've written about this when comparing purchasing with operating and long-term leases. Each option exists for a reason. For businesses that need a fleet, investing in purchasing multiple vehicles and then paying additional costs (maintenance, registration, insurance, etc.) isn't cost-effective. This creates budget imbalance and makes financial planning difficult.

Through partnership with BizRent, businesses of all sizes can focus on their core activities and avoid purchasing vehicles that will lose value in just a few years.

Operating lease is a practical solution because all possible costs are covered by a fixed monthly fee - maintenance, servicing, insurance, and vehicle depreciation. Purchasing makes more sense when acquiring a cheaper or used car. In any case, purchasing requires higher initial costs, while operating lease covers everything with one fixed monthly fee.

Can the contract be modified during the operating lease?

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

Many operating lease contracts are adaptable to user needs. This includes changing the number of vehicles in the fleet, adjusting contract duration, and the option to upgrade vehicles. This flexibility allows clients to optimize their costs and adapt their fleet to current business needs.

This adaptability is what BizRent operating lease offers.

What happens to the vehicle at the end of the lease?

This is another question our clients often ask during consultations.

As we explained in the operating lease definition - there's no transfer of ownership after the contract. At the end of the operating lease contract, the user has two options:

• Return the vehicle to the leasing company and end cooperation
• Renew the contract with a new vehicle

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

Does operating lease have hidden costs?

Does operating lease hide additional costs that aren't obvious when signing the contract?

Transparency is very important when making any contract. Monthly fees cover all major costs such as insurance, vehicle maintenance, servicing, and more. The client is informed about all possible additional costs that may arise, such as exceeding the agreed mileage or damage beyond normal wear and tear. Conditions can vary between agencies, and the model and age of the vehicle play a role.

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

How does BizRent charge for annual mileage overrun?

Charging for excess mileage is standard practice. To avoid this, BizRent offers several options.

Our limits vary based on engine type:

• Diesel engines: 15,000, 30,000, 45,000, and 60,000 kilometers annually
• Petrol engines: 20,000, 40,000, and 60,000 kilometers annually

If these limits are exceeded, each additional kilometer is charged at €0.15.

How does operating lease affect taxes?

Does operating lease really bring significant tax benefits for businesses?

We've written about how to utilize operating lease benefits. If you've read it, you know that operating lease payments are treated as business expenses, which can reduce a company's tax base. This allows businesses to optimize their tax obligations and better plan their finances.

As they say, it's a win-win.

Does operating lease have flexible cancellation terms?

Are operating lease contracts difficult to terminate?

The truth is that complications can arise when terminating a contract if there's disagreement or non-compliance. It mostly depends on the specific contract terms that were signed. Operating lease often offers a certain level of flexibility in cancellation terms, but this can vary.

What does this mean?

It means that operating lease contracts include penalties for termination before contract expiry. Reasons for termination can vary, but most commonly it's the inability to pay monthly fees. However, it's important to understand that leasing companies bear huge financial risk of vehicle ownership, so it's normal for them to structure contracts to minimize their losses from early termination.

However, exceptions exist.

Some leasing companies offer adaptable contracts that allow users to change conditions during the lease, 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 might be more favorable.
• Business changes: Changes in user's business, such as seasonal needs or reorganization, may enable more flexible termination.
• Good vehicle condition: If the vehicle is in good condition and hasn't exceeded the agreed mileage, termination might be easier.
• Positive relationship with the leasing company: Long-term and positive relationships with the leasing company can bring more favorable termination terms.
• Contract replacement: Taking a new contract for another vehicle from the leasing company's offer can facilitate termination of the previous contract.

What is BizRent's policy before contract signing?

To prevent unpleasant situations, users must go through KYC (Know Your Customer) or KYB (Know Your Business) protocol before starting cooperation with us, which determines financial background and establishes trust with the user.

Ready to upgrade your fleet?

Operating lease isn't just a way to acquire vehicles - it's a strategic decision that allows you to focus on growing your business.

With BizRent you get:

• Diverse vehicle selection
• Transparent terms with no hidden costs
• Flexibility tailored to your business
• Complete service and maintenance at authorized centers
• Team of experts dedicated to your success

Don't let fleet management concerns slow down your business growth. Contact us today and schedule a consultation - our team will help you find the optimal solution for your needs.

P.S. Have more questions? We're here to help. Send us a message and we'll be happy to explain everything you want to know.