This controversial issue arises from too different car leasing and car loan terms. There are also significant differences in the cost of purchasing a car on credit and leasing. The only factor that can guide your choice in this case is the specific optimum program across the entire range of financial services, regardless of which bank transaction category your car purchase falls into: car loans or car leasing.
What is car leasing?
Car leasing – it is financial assistance up to 90% of the value of the car to be purchased. Many leasing companies offer to use their offer not only for the purchase of cars, but also for the purchase of motorcycles, special equipment, even boats, yachts, quads . Almost every leasing company has an online customer base with its own WEB page where you can use the online calculator and calculate the upcoming costs associated with repaying your loan. With this device, you can choose the financing method that suits you and will be “conservative” to your family’s budget.
Comparison portals can also help your next leasing recipient or borrower to find out which car leasing offer will be most beneficial to you.
Car leasing: decoration
Any adult in Latvia can apply for leasing a car. The main condition of car leasing that you will have to accept is that the purchased car will have to be registered in the name of the leasing company and not in the name of the customer (this condition is most often in the leasing). To obtain permission from a finance company to purchase a car lease, the next borrower must apply for a car lease and provide some information about themselves. If the leasing company evaluates your solvency positively, you will immediately make a positive decision.
The leasing contract will be concluded when the borrower makes the down payment. The amount of this payment can vary from 5 to 10% of the value of the car itself. The lessor will be the car owner until the car lease is fully repaid . And only when the customer has fully settled with the company will the car ownership pass to the borrower.
Upon conclusion of the contract, the amount of the car leasing must cover all other expenses: drawing up of documents, insurance policies, if such are specified in the terms and conditions of concluding the transaction.
How the car lease is repaid
Car leasing with its repayment mechanism is almost no different from a regular car loan repayment, if only in terms of amounts. Therefore, the repayment proceeds according to the schedule, which is already drawn up at the time of the conclusion of the contract, and is immediately issued to the borrower.
Repayment of a car lease can be made even more profitable and economical if the repayment is made in large installments or more frequently. Just like a car loan, early repayment of a car lease will save you money at the expense of an unused rate – you will only pay an annual commission for the period for which you have used a car lease.
What is a car loan
A car loan is a creditor-financed purchase of a car. In addition, auto loans usually do not require a down payment. By signing a credit agreement, the car owner becomes the borrower, so the deal is made with the participation of all three parties (the car salesman, the finance company and its customer). Buying a car loan is not a mandatory policy.
What’s the difference between a car lease, a car loan and a mortgage loan?
When applying for a car loan, the borrower becomes the owner of the car immediately after signing the contract . When applying for a car lease and or a loan against a car lien, ownership of the car is transferred to the lender, that is, the leasing or financial organization. As soon as the leasing or loan is fully repaid, the former borrower will become the owner of the machine again.
Full car leasing or car loan repayment means visiting the CSDD and re-registering the car in the name of the customer or a third party.
Annual interest rate: calculated according to the formula
To determine the exact annual percentage rate of charge (APRC), it is necessary to consider all the borrower’s costs involved in processing and repaying the credit. For bank loans, the following customer costs will not be included in the total:
- Any payments made by the borrower in the event of failure to comply with the terms of the contract (in whole or in part).
- Payments not included in the price of the car but made by the borrower at the time of the purchase of the car and irrespective of the form of payment (cash or non-cash).
The annual interest rate covers all costs associated with maintaining and maintaining a bank account, as well as the costs of transferring money to a separate account for repayment of the credit. The only exception is when the client has opened an account with the bank for other purposes or separately from drawing up a loan . In this case, he must have a separate contract with the finance company and reimburse this expense in the prescribed manner.
The annual percentage rate of charge (APRC) is calculated using the following formula:
X – annual interest rate
m – price of all credit resources
k – the exact loan price, which must correspond to the expression 1 <= k <= m;
Ck – sum of k loan units, their amounts;
tk – years or months expressed as the time between the date of the first loan disbursement and the date of repayment of each subsequent loan, indicating the share of expenses. In this way, the initial index must correspond to the equation t1 = 0;
l – the specific payment and its amount, its serial number;
sl – years and months or other periods, expressed as the time between the cash received and the subsequent repayment of the loan (other borrowing costs on the scheduled repayment date according to the schedule).
The equation described allows you to determine the price of the next loan or to determine the equivalence of current costs with the total number of loans.