In the conditions of high key rate and fierce competition in the commercial transport market, the issue of financing the renewal of the fleet becomes critical for business. Many entrepreneurs still rely on bank loans without realizing that they are not leasing schemes They can offer significantly more favorable conditions for legal entities and IP. The question of what is the plus of leasing ceases to be theoretical when it comes to real savings in tax payments and the preservation of the company's working capital.
Traditional credit requires immediate withdrawal of a large amount from turnover or a significant overpayment of interest, which in the current economic realities can reach cosmic values. leasing companyUnlike a bank, it is the owner of the property until the end of the contract, which allows it to apply special tax regimes and transfer this benefit to the client. It is this hidden subsidy mechanism that makes the tool attractive to those who know how to count the full cost of ownership of an asset, not just the monthly payment.
In this article, we will discuss in detail the economic efficiency of this tool, touch on the issues of accelerated depreciation and analyze why for some categories of equipment leasing is an uncontested solution. You will understand how to structure the deal properly to get the maximum margin from using borrowed equipment or transport.
Tax incentives and cost optimization
The main argument in the dispute, what is the plus of leasing, lies in the taxation system. Legal entities operating under the General Taxation System (FTS) have a unique opportunity to reduce the tax base on income tax. Leasing payments are fully charged to the cost of products or services, which automatically reduces the taxable base. This is a fundamental difference from a loan, where only the amount of principal and part of interest are included in the expenses, but not the entire value of the asset at once.
The second most powerful tool is VAT (20%). Since the leasing company issues invoices with the allocated tax, the lessee has the right to take this VAT deductible. In fact, the state refunds you 20% of the cost of the car or equipment. In monetary terms, this means that the real value of the asset for your company is reduced by one-fifth, which in terms of the million-dollar purchases of the fleet is a huge savings.
In addition, the legislation allows the use of accelerated depreciation mechanism with a factor of up to 3. This means that you can write off the cost of the equipment three times faster than with a standard depreciation schedule. Accelerated depreciation It allows you to artificially understate profits in the first years of using the technology, deferring the payment of income tax to a later period, which in the face of inflation is an extremely profitable financial strategy.
⚠️ Note: The right to apply accelerated depreciation and VAT deduction is only valid for VAT payers. If your company is running on a simplified (SN), the scheme of work changes, and the main emphasis should be on including payments in expenses, but the VAT deduction is not available to you.
The final financial result often shows that even with a higher nominal rate in the contract, the real value of money in leasing is lower than the bank loan due to tax shields. It is important to correctly calculate the effective rate taking into account all returns in order to make an informed decision.
Preservation of working capital and lines of credit
One of the key issues for any business is liquidity. When you buy equipment on credit, the bank typically requires a down payment of 20-30% and often asks for additional collateral. Leasing allows you to start with a minimum advance, which can sometimes be 0% or 5% of the value of the subject of the contract. This allows you to save “live” money in accounts for the purchase of goods, payment of salaries or marketing campaigns.
Also, leasing doesn’t eat away at your lines of credit at banks. For a bank, you remain a low-load borrower, as leasing obligations are often not as aggressively reflected in credit history as direct loans, or accounted for separately. This gives you the opportunity to apply for an overdraft or working capital loan at any time, getting approved faster.
Let’s look at the funding structure:
- 🚀 Minimum advance: The ability to start using the equipment, paying only a small part of its cost, the rest will cover future profits.
- 🛡️ Asset protection: Since the owner is a leasing company, in the event of force majeure or bankruptcy (in certain legal structures), this asset is more difficult to withdraw from the operating company.
- 📉 Reducing the load on the balance: In the case of operational leasing, the property may not be displayed on the lessee’s balance sheet, which improves the financial ratios of the company in the eyes of partners.
It is also worth noting the flexibility of the payment schedule. Unlike annuity payments on a loan, where the amount is fixed, in leasing you can adjust the seasonal schedule. For example, for a construction or agricultural company, payments may be higher during the activity season and minimal or absent during downtime. This allows you to synchronize expenses with cash receipts.
Comparison of leasing and credit: table of advantages
To clearly demonstrate what is the plus of leasing before a classic banking product, we will summarize the main parameters in a single table. This will help you quickly assess the difference in terms and requirements for the borrower.
| Comparison parameter | Bank loan | leasing |
|---|---|---|
| Owner of property | The borrower (from the moment of purchase) | Leasing company (until the end of the term) |
| VAT (20%) | Not coming back. | Returns completely |
| Income tax | Reduces the base partially (interest) | Reduces the base completely (payments) |
| Requirements for the borrower | High, strict scoring. | Flexible, solution in 1-2 days |
| Additional security | Often required (provider, guarantor) | The pledge is the subject of the lease itself |
As can be seen from the table, leasing benefits from tax preferences and lower collateral requirements. However, it is important to understand that the nominal rate in a lease may look higher than the bank rate. But after applying tax breaks, the effective rate is often lower.
Leasing companies also assume risks related to the liquidity of the subject of the contract at the end of the term. If you take out a loan, you yourself think about how to sell used equipment in 3-5 years. The lessor puts the residual value in the calculations and often offers to buy the equipment for 1% or 0.1% of the book value at the end of the term.
When comparing offers, always ask for an effective interest rate (EPR) calculation that takes into account all tax benefits, rather than looking only at the amount of the monthly payment.
Flexibility of conditions and individual structuring
The banking system is sharpened to standards: template contracts, strict requirements for documents and a unified approach to all customers. Leasing companies, being more mobile structures, are ready to meet and structure the transaction to meet the specific needs of the business. You can choose any payment schedule: decreasing, seasonal, with the first payment deferred (grace period) or with a ball payment at the end.
The possibility of including additional services in the contract is especially valuable. In the amount of leasing, you can sew up not only the cost of the car, but also:
- 🛠️ Maintenance: Regular work, replacement of oils and filters for the entire period.
- 🚗 Insurance: CASCO, OSAGO, cargo insurance, often with discounts from the lessor's partners.
- 🌍 Logistics: Delivery of equipment from the manufacturer, customs clearance (for imported cars), registration with the traffic police.
This makes leasing a turnkey product. You do not need to search for a separate insurance service, separately deal with registration. All these costs are also allocated for the duration of the contract and reduce the taxable base. For companies with a large fleet, this also means centralizing all costs in one place and simplifying document flow.
⚠️ Note: Carefully examine the contract for terms of termination. Since the owner is a leasing company, in case of late payments, it has the right to withdraw equipment without a court faster than the bank. Keep an eye on payment discipline.
In addition, leasing allows you to test new equipment. If you are not sure whether a certain model of special equipment or truck is suitable for you, you can take it to operational leasing for a short period of time with the right to buy or return. This reduces the risk of buying an inappropriate asset.
Process of registration and speed of decision-making
The speed of obtaining financing is another strong argument in favor of leasing. While the bank conducts a multi-stage committee, checks each certificate and requires a stack of documents, the leasing company can make a decision in 24-48 hours. For a business where the equipment is needed yesterday to execute a contract, this time becomes a critical resource.
The process of registration is simplified as much as possible. Often a minimum package of documents is required: an application, copies of the passports of the head and founders, as well as financial statements for the latest period. Leasing companies look more at the cash flow of a business and its ability to generate profits to pay payments than they do at an ideal credit history.
☑️ Application documents
The redemption procedure has also been simplified. Upon termination of the contract and payment of all payments, the ownership of the property shall be transferred to you automatically or by a simplified act of acceptance and transfer. You do not need to re-enter the registration procedure if the equipment has already been issued to you with a note about the pledge (in some schemes), or you simply register the transfer of the right to the traffic police, having a lease agreement and a deed in hand.
For large transactions, for example, the purchase of a fleet of 50 trucks, the leasing company can act as an aggregator, purchasing equipment from different suppliers and combining it into one contract. This eliminates the need for accounting to make dozens of individual payments and acts.
Risks and Limitations of Leasing Schemes
Despite the obvious advantages, objectively and disadvantages are necessary. The main risk is the loss of the right to use property in case of systematic delays. Since the owner is not you, but a leasing company, the withdrawal of equipment is much faster and easier than foreclosure on a loan. The vehicle can be found and evacuated as soon as possible.
The second point is the restrictions on the disposal of the asset. You cannot simply sell, donate or sublease equipment to third parties without the written consent of the lessor. All actions with the asset must be agreed. This creates certain operational difficulties if the business plan changes dramatically and the equipment needs to be implemented urgently.
It is also worth considering that with early redemption of leasing, you can lose part of the tax benefit. If you decide to close the contract in the middle of the term, the leasing company will recalculate the schedule, and it may turn out that the savings on interest will be less than the lost tax deductions that you will not have time to receive. Early buyout It is not always profitable in terms of a full-term financial model.
What happens to the equipment when the company-leaser is liquidated?
In case of bankruptcy of the lessee, the subject of leasing is not included in the bankruptcy estate, since the owner is the leasing company. It simply takes away its property, and you lose the opportunity to use the equipment and the funds already paid can burn in the register of creditors’ claims.
FAQ: Frequently Asked Questions
Can an individual take out a lease?
Yes, from 2020 in Russia, individuals also have the right to conclude leasing agreements without the status of an individual entrepreneur. However, tax benefits (VAT refund and expense attribution) are available only to legal entities and individual entrepreneurs on the basis of the tax. For individuals, leasing works as an alternative to car loans, often with more flexible approval terms.
Which is more profitable: leasing or credit for IP on USN?
For the IE on the SIM (simplified system), the classic tax advantages of leasing (VAT and income tax) do not work to the fullest. However, leasing can still be more profitable due to the inclusion of the entire amount of payments in expenses (reducing the USN tax by 15%) and the possibility of applying accelerated depreciation. In addition, leasing is easier to get.
Can I buy used equipment in leasing?
Yes, many leasing companies work with used equipment. The age requirements for the car are usually up to 10 years (sometimes up to 15) at the time of the contract termination. The rate on used technology may be slightly higher due to liquidity risks, but the mechanism of operation remains the same.
Do I need to insure the subject of leasing?
This is a requirement of most lease agreements. Since the owner is a leasing company, it must be confident in the safety of the asset. Usually, the policy of CASCO and CTP is issued for the entire term of leasing, and its cost is included in the payment schedule.