The data leaves no doubt. After growing 7.7% in 2018, so far in 2019 20% (one in five) cars registered in Spain have already been through leasing. We are in a world where there is a tendency not to own property, but to pay a fee to be able to enjoy them. And the automotive industry is not immune to this trend.
Renting (which is still a long-term rental) began as a very interesting service for companies. It has innumerable economic advantages. It is estimated that it represents a saving of approximately 15%, since it includes services such as maintenance and insurance. But, above all, for companies and the self-employed, it means eliminating variable costs associated with the use of vehicles, in exchange for a fixed monthly cost, in addition to not requiring a large initial investment.
Unlike leasing, where the Purchase option It is an essential element, leasing implies greater flexibility, in addition to not affecting debt ratios, nor is fixed assets increased. Obviously, within leasing contracts there are different levels of flexibility.
These are accounting aspects that are very important when making a balance in a company. But is renting a good option for an individual? In these cases it is common to have the car much longer, which made it inconvenient from an economic or financial point of view. But everything changes and there are already people who do not want to have the same car for so long, since their needs vary over time.
On the other hand, in the current scenario, with a variety of propulsion systems never seen before, from cars with traditional combustion engines to 100% electric, passing through hybrids and plug-in hybrids, it is more likely that you will not be interested in owning the property. of a vehicle, on pain of its propulsion technology becoming obsolete in a short time and the car depreciating too much after a while.
Advantages of renting for an individual
These are some of the strengths of having a rental car
- Comfort: In exchange for a monthly fee, you enjoy a vehicle with all expenses included. Maintenance, repairs, insurance, roadside assistance and taxes are included. We recommend you take a look at the small print of the rental contract. There are companies that include services such as changing tires, replacement vehicles in the event of a breakdown, management of fines…
- goodbye unforeseen: Say goodbye to those scares that you get when the month comes when you have to pay the car insurance or you have a breakdown that you did not count on. The fee to pay is the same every month. Your only variable expense is fuel. Renting cars have to pass the ITV, but it is rare that they have to, since many contracts end or are renewed with new cars before it is their turn. Planning expenses is much easier.
- Don’t spend savings: There is no need to make a large initial outlay. You pay the first installment and start enjoying the car. Nor do you have to worry about financing the car.
- Cars with the latest technology: You access a car released recently, so you drive the best in terms of efficiency and safety. It is always so. The leasing company maintains ownership of the car for the first years of its life, when maintenance costs are minimal. It is at that moment, when the car still has a good residual value, when the leasing company sells them as second-hand cars… and the fleet is renewed.
- Cars at a cheaper price: Don’t expect bargains, but since leasing companies buy in large volumes, they buy cars much cheaper than you. Obviously they make money, they are companies, but there is also a lot of competition and the best price they get has
- goodbye to devaluation: As we said before, if the car, for whatever reason, loses a lot of value (it does not have an ECO label, it is diesel and nobody wants it anymore, SUVs suddenly stop being fashionable…) it is something that you no longer it’s up to you The problem of this higher depreciation is transferred to the leasing company.
When can you be interested in the traditional purchase?
No, renting is not for everyone, since there will be someone who is financially more convenient with a more traditional purchase method (cash payment or financing). And it is that, in the case of an individual, the benefits are lower, since the monthly fee includes VAT, without the possibility of being able to deduct it later. In addition, professionals can also deduct the amount in their quota in the Personal Income Tax Direct Estimation Regime, provided that it is a necessary expense for the development of their professional activity.
Despite its name, it is also very difficult for some types of renting to interest a “ordinary” driver. Of these types of renting, due to its amount, the first is more interesting to an individual:
- Fixed renting: You choose a model and different associated services, which has a certain fee. The duration of the contract varies depending on the vehicle, but is usually between 1 and 48 months. Of course, breaching the renting contract is penalized.
- flexible leasing: In exchange for a higher fee than the first one (for the same vehicle), you do not commit to the time you are going to use it. That is what flexible renting consists of, in which the return has no penalty. This is a type of service thought a lot in companies, whose needs tend to be more variable over time than in an individual (especially in relation to commercial vehicles).
If you are one of those who like to modify your car, then renting is not for you. Because you will not be the owner of the car, but a simple renter. Nor will you be able to take the car where you please, that is decided by its owner (obviously). And also be careful with the kilometers that are stipulated in the contract. It is a rule that, if the established number of km is exceeded, a penalty must be paid. And they are usually quite large, since excess mileage affects how much the leasing company expects to get for the car when it is sold.
How to calculate to the cent what suits you
It is not necessary to be an economist to know if renting is right for you. Just add and multiply. And then compare. It is also necessary that you know two pieces of information: the km that you are going to do per year and the time that you think about renting. In this case, we are going to do it with 48 months, assuming that we finance the payment of the car in that same time.
- bought car: Entry + Financing fee (x 48 months) + tax cost of mechanical traction vehicles (x 4 years) + insurance cost (x 4 years) + maintenance costs (x 4 years). At this amount you should subtract the salvage value vehicle. Nobody knows that exactly, but you can appraise a similar car and get an idea.
- rental car: Initial contribution (if any) + renting fee (x 48 months), with its corresponding VAT. You can calculate it in an online renting quoter.
Normally (we have carried out several simulations) the four-year cost is lower in a rental car. The main difference is that in the first case you own a car that is barely four years old… and in the second, nothing (you must return the vehicle). If we have it for more years, the figure begins to be favorable depending on the number of years you keep it. Of course, from the fourth year the maintenance costs are higher.
The companies that offer renting to individuals try to hook these new clients (who will not be able to enjoy tax advantages such as companies and the self-employed) with offers that include all services (all-risk insurance policy without excess, change and repair of tires , comprehensive maintenance of the vehicle, or the taxes and procedures necessary for the registration of the car). In many cases, the initial contribution (percentage of the price of the vehicle as an entry) is also eliminated, and the duration of the contract is reduced. In this way, instead of the usual four years, periods of up to one year are offered.
If you are one of those who likes to brand new a car, you have calculated more or less exactly how many kilometers you drive per year and you do not want to have to worry about paying taxes, negotiating insurance policies or taking care of mechanical revisions (saving time, in short), pay attention to renting offers to individuals, as they may be suitable for you.
