Leasing agreement: types, terms, samples
Leasing is a special financial lease, and it is an excellent alternative to a standard lease or loan. Why is that? On the basis of a lease agreement, it is possible to use for a low fee cars, real estate or various equipment in the course of production activities or for other purposes. The amount of payment is calculated depending on the value of the applied object and the price policy of the lessor. At the end of the term of the agreement, it is possible to purchase the property, and the residual value is used for this.
Concept of leasing
This financial lease is in demand in many Western countries. Some people do not become owners of cars at all, as they regularly draw up a lease agreement for new cars.
Most often, such an agreement is made in respect of auto, equipment, necessary for the production, as well as the use of various commercial properties.
The subject of leasing can be both movable and immovable objects.No contract can be drawn up for land, various natural objects or property owned by the state.
The lessor can only be the owner of the property, transferred for a certain monthly fee to use to another person. The leasing recipient can be either a company or an individual. He has the opportunity to use certain property for a low fee. In this case, in many agreements, an item may be purchased after the expiration of the contract, if there is a need for it.
Types of leasing
There are several varieties of this financial lease. These include:
- Financial. The financial leasing contract is made most often. After the expiration of the contract from the tenant, called the lessee, it is possible to redeem the subject of the agreement. To do this, the residual value of the property is calculated, and depreciation for the entire period of use is taken into account. Often, the object is completely transferred into the ownership of the lessee without payment by the latter of any funds.A financial lease agreement may be made for cars, real estate, equipment or other material values.
- Operational. In another such leasing is often called operating. Under this agreement does not provide for the possibility of redemption of property. It is usually leased by the owner again. Set under the contract a high rate. Standardly such leasing is used in relation to real estate, which even after a long period of use does not lose its value and value.
- Returnable. Such a lease agreement is offered quite rarely. This is due to the fact that the owner of the property is the lessee. It is presented as a specific type of loan, on the basis of which the pledge is your own valuable item. The legal entity involved in the transaction is faced with simplified taxation, which has a positive effect on the economic effect of the work.
Additionally, the agreement may differ depending on the terms of the lease agreement. Therefore, leasing can be with full or incomplete payback. In the first case, the value of the property pays off during the entire term of the contract.In the second case, the object pays off only partially, therefore, it can be re-leased as standard.
Additionally, there are some unusual types of leasing, which are called differently forms. These include:
- net - costs are borne solely by the lessor;
- partial - the cost of property maintenance is divided between two parties to the transaction;
- full - expenses must be borne only by the lessee;
- direct - directly the owner of a particular item is engaged in its delivery in a financial lease;
- urgent - the object is rented only once;
- internal - the transaction is implemented only in one country;
- indirect - the contract is signed by an intermediary;
- external or international - the participants in the transaction are citizens of different states;
- separate - several participants are involved in the transaction, including even banks;
- renewable - at the end of the term of the agreement there is an opportunity to renegotiate it;
- General - the manufacturer provides rental of additional equipment without the need to sign a new contract.
The most frequently drawn up contract of redemption leasing, on the basis of which the lessee has the opportunity to redeem the property if necessary.
The principle of operation of leasing companies
These organizations consist of several departments, as it is required to analyze the demand on the market, use different marketing methods to increase sales, and also deal with numerous legal issues. Therefore, the company necessarily includes a marketing, analytical and legal department.
The main partners of such an organization are banks, insurance companies and the administration of the region. Leasing deals are regularly concluded with direct clients. They are tripartite, as not only leasing firms and users of the subject of the contract participate in them, but also the direct manufacturer of the automobile, equipment or another element.
Leasing companies are only intermediaries in such a transaction. They prepare the necessary documents and perform other similar actions, which allow to simplify for individuals or companies the process of obtaining any item for use.The transaction procedure is divided into the following stages:
- Initially, the lessee submits an application to the leasing company, where it is indicated which item he should be leased;
- specialists of the company evaluate the liquidity and expediency of such a transaction;
- in case of a positive decision, the company purchases from the manufacturer the necessary equipment represented by the leased object;
- between the leasing company and the client an agreement is drawn up for the leasing of equipment or other items;
- An item is transferred for use to the lessee, who must then transfer to the company the necessary payments in a timely manner.
Leasing is available not only to individuals, but also to different companies. Citizens consider car leasing contracts to be the most popular, allowing for a small monthly investment to get a quality and new car for use. It may, at the end of the contract, be redeemed at residual value. It is much easier to draw up such an agreement than to receive a loan from a bank, since not too stringent and numerous requirements are imposed on lessees.
Conditions for individuals
Large leasing companies usually prefer to work only with legal entities. But at the same time in the market you can find small businesses, targeting individuals. Most often a car lease contract is concluded with citizens. To do this, take into account some of the nuances:
- Considered the most profitable registration of financial lease in relation to expensive cars;
- to confirm the solvency, it is enough to take a certificate 2-NDFL and a copy of the employment record from work;
- the term of the agreement usually does not exceed three years;
- Initially, you will have to invest some amount of funds represented by the first installment, and usually it does not exceed 10% of the value of the selected car or other item.
The most popular is the scheme on the basis of which citizens do not buy cars, but constitute a new agreement, under which a new car is transferred to them. Under such conditions, with low investment, people can regularly use new machines.
The specifics of leasing to firms
Frequent clients of leasing organizations are legal entities.They regularly buy equipment or even real estate through these services. To draw up a lease lease agreement, you need to take into account some features of this process:
- leasing is provided only to companies that have been operating effectively for at least 6 months;
- the balance sheet must be positive;
- An initial investment is required - 15% of the cost of equipment or another item.
Financial statements of companies are studied with special care. The term of the lease agreement varies from 1 to 5 years, and the size of monthly payments depends on the length of the financial lease.
Companies usually use leasing not for the temporary use of different equipment, but for the opportunity to buy it at the end of the contract term. Such a choice is considered more acceptable in comparison with a loan. A new company operating for only half a year cannot count on receiving a large amount of funds from a bank, so it is advisable to apply to leasing companies. At the end of the lease term, the property is repurchased. Additionally, companies can save on interest, since overpayment is usually less by 10% compared to loans.
The disadvantage of using a financial lease is the fact that it is impossible to extend the term of the lease agreement, therefore, it is provided for a maximum of 5 years. Due to this, payments are high for some businesses.
Accountants of the organization should know which wiring under the lease agreement to use. Since the property for the entire duration of the contract belongs to the leasing company, the user of the subject does not have to pay taxes, which reduces the tax burden on the company.
Pros and cons of financial leases
The use of this method of obtaining different property has certain advantages and disadvantages. The positive parameters for drawing up a leasing agreement include:
- Leasing is considered affordable for each person or company, so it is not required to prepare a lot of documents or to meet the numerous complex requirements that are imposed by each banking institution;
- it is possible to use the necessary equipment or another item even without having the necessary amount of money to purchase it;
- if the equipment used is morally obsolete or it needs urgent updating and modernization, then you will not have to sell it yourself,since it is returned to the lessor, after which it is possible to draw up an agreement on the necessary unit;
- if the company declares itself bankrupt, then it returns the used items of the leasing company at various costs;
- contract payments are usually less than under a standard loan agreement;
- the parties to the transaction decide independently what the amount of the payment will be, and when the funds should be deposited.
But the use of this method of obtaining different equipment or technology has some drawbacks. What exactly? They are not so little.
Disadvantages of concluding a lease lease agreement:
- if for any reason the funds are not transferred in a timely manner or other provisions of the contract are violated, then the subject of the agreement will have to be returned;
- on certain transactions, when really expensive equipment is purchased, payments will be much higher than loan payments, and this is due to the short period for which leasing is provided;
- if in the process of using the property it is damaged, then the lessee is directly responsible for this, although it is not its owner;
- Usually, by the end of the contract validity period, the items used are morally and physically obsolete, so you have to replace them, and as a result, the company does not have its own equipment.
It will not be possible to take advantage of leasing to firms that are just starting their activities, as well as to individuals who do not have official income. This is due to the fact that each leasing company prefers to cooperate exclusively with those customers who can prove their solvency.
What are the material conditions contained in the document?
When drafting a contract, each party to the transaction must carefully evaluate all the terms of this agreement. Most attention should be paid to the essential conditions of the document. These include:
- accurately describes the subject of the lease agreement, which may be equipment, car or other valuables;
- the amount of rights that are transferred to the lessee, as often he must perform repairs or maintenance, although these duties should be implemented by the direct owner of the item;
- prescribes when and in what way the selected equipment will be transferred to the client of the leasing company;
- includes the operating conditions of the item
- specifies the period during which this agreement will be valid;
- the total amount that will eventually be paid by the lessee;
- the nuances of accounting for the leased asset are entered, and it is also specified whether accelerated depreciation will be used;
- decides whether the item will be registered to the lessee in an official manner;
- grounds for early termination of the contract;
- lists the rules on the basis of which the item will be used, maintained, stored or repaired;
- specifies the settlement procedure, for which a special schedule is usually formed, on the basis of which the lessee must transfer funds;
- whether any additional collateral is provided;
- must contain information about insuring the item;
- All additional services that are provided by the leasing company by agreement are listed.
Each condition has its own nuances, so during the study of the agreement should pay attention to all items. A sample of the lease agreement is shown in the photo below.
How are the calculations made?
The most important for each party to such a transaction is considered the order of payments under the contract. Payments under a leasing agreement are established depending on the term for which the financial lease is issued, and the cost of the equipment itself, transferred by agreement, is also taken into account.
In addition to the contract, a payment schedule is drawn up, on the basis of which funds are deposited. It indicates when exactly the funds should be transferred, as well as in what amount and in what way.
Even two schedules are often drawn up for a property leasing agreement: a money transfer schedule and a payment schedule for the leasing itself. The second document is required by companies for the implementation of optimal accounting, as it serves as the basis for the reflection of payments in the statements.
What additional services can be offered?
Each leasing company can offer its customers a variety of additional services.They are all specified directly in the agreement. For example, if a car is acquired on the basis of such an agreement, then additional services may be:
- purchase of rubber for use in winter;
- car registration in the traffic police;
- purchase of an insurance policy;
- assistance during travel, if necessary;
- storage of different equipment to the car;
- car repair if necessary;
- availability and provision of a replacement vehicle at the time of repair;
- each client is assigned a personal manager, with whom all emerging issues are resolved;
- Often, the leasing company is given help if the lessee gets into an accident through no fault of his own and needs to collect funds from the insurance organization.
All of the above additional services are usually charged a certain amount, which leads to an increase in payments. Therefore, often the clients of the leasing company prefer not to use these offers in order to reduce the overpayment of the contract as a result.
A prerequisite in the agreement is the possibility of redemption of the used property. This item is significant for each lessee.
If there is a possibility at the end of the contract to redeem the property, it must be stated that the redemption value is calculated for this. To do this, take into account all previously listed payments and depreciation. Only under such conditions it will be really profitable to redeem the property.
The redemption is the lessee’s right, not the obligation, so he can refuse such a decision. Immediately after the expiration of the contract, he transfers the property back to the leasing company. He can re-conclude a contract by choosing other equipment.
The nuances of termination of the contract
The agreement itself clearly states what its term is. But at the same time there is an opportunity to terminate the lease agreement before the end of this period of time. The reasons are usually stated directly in the agreement.
The basis for termination of the contract is usually a violation of its clauses by any party to the transaction. For example, the lessee ceases to make payments or the lessor refuses to repair, although this is stated in the agreement.
You can terminate the contract with the help of a peace agreement or through the courts, if one of the parties sues the violator.The court considers all the circumstances of the case, after which the optimal decision is made.
Thus, a leasing agreement is considered to be a demanded document, on the basis of which citizens or companies can get a car, equipment or other items for use for a low fee. The drafting of this agreement has both advantages and disadvantages. It is important to figure out what essential conditions must be prescribed in the contract. Additionally takes into account the possibilities and rules of termination of the contract. For many people and enterprises, leasing is considered more profitable and acceptable as compared to getting a loan or arranging a lease.