The car is an essential part of our daily lives. But, we must admit that it is a significant investment, whether it is the purchase of a new or used vehicle. Fortunately, many auto financing or car rental formulas are now available on the market. It is, therefore, possible to appropriate a vehicle adapted to your needs, without having to pay a large sum when it is made available to you, thanks to car leasing which offers 2 rental options: LOA and LLD.
What is a Leasing?
Car leasing is a very fashionable formula. More and more people are using this option to afford a vehicle for daily or occasional use.
There are 2 types of leasing :
- the LOA (lease with option to buy)
- LLD (long-term rental).
But what is it all about, what is the difference? By definition, leasing is a car rental contract between a specialized rental company and an individual or professional. After having completed a few steps to make leasing, the lessee pays monthly rental fees to the owner of the vehicle to be rented. Car leasing often lasts between 1 and 5 years, depending on the contract agreed by the 2 parties.
Car leasing: what are the advantages?
This solution is interesting for people who have a limited budget or who do not want to commit to the purchase of a vehicle for a particular reason. It was precisely proposed to help motorists looking for a new alternative to replace the purchase of a car or to avoid the use of a long-term car loan. This has a significant advantage: that of being able to drive a vehicle that you do not want or cannot acquire immediately.
You are free to devote a monthly budget according to your available resources and the financing solutions available to you. Leasing allows you to change cars, without having to deal with the sale afterward. Car with LOA or LLD, it’s up to you, depending on what suits you best.
Rental with Option to Purchase (LOA)
Also known as leasing, rental with option to purchase (LOA) is an interesting formula that consists of making a new car available to a lessee for a period determined in the car leasing contract, in the counterpart of a monthly rent paid to the service provider.
A security deposit which sometimes reaches 15% of the price of the vehicle is also required by the lessor. Note that when subscribing to the lease with the option to purchase, you must insert the residual value or the purchase price of the vehicle.
It is generally better to use an LOA without contribution: even if the personal contribution offers the possibility of reducing payments, this reduction in monthly payments remains quite minimal. If necessary, it is preferable to limit this to 10% of the value of the vehicle, a threshold from which the interest of the offer may become questionable.
When the contract ends, the tenant has 3 choices:
- either he returns the automobile to the lessor
- either he renews the rental contract
- or he decides to buy it.
In the latter case, you acquire the car at the price set in the rental contract. But, it is necessary to deduct the guarantee of a 15% deposit during the subscription of the contract (some car sellers offer LOA without contribution too). Maintenance, assistance, and repair costs are not included in the LOA, except if you decide to add these car leasing services to the contract. This solution, therefore, makes it possible to reduce the purchase of a vehicle. On the other hand, if you have decided to return the car to replace it with another or to end your rental contract, the vehicle must be in good working and maintenance condition.
We generally consider an LOA offer as interesting if the cost of all the rents and the contribution remains below 50% of the price of the new vehicle for a 3-year contract, or below 60% for 4 years.
Also, be aware that some car rental companies offer rental offers with the option to buy before the end of the term. You can therefore become the owner of the vehicle before the end of your rental contract. However, compliance with a one-year deadline is required if you want to anticipate the acquisition of the said car.
According to studies, leasing with an option to buy is an effective way to buy a vehicle at a low cost. The final price of the car decreases, thanks to the payment of the monthly installments. On the other hand, the LOA has some disadvantages in the event of difficulties in paying the monthly payments. You will not have the right to request a deadline extension from the lessor. If you are late in paying the monthly rent, the latter immediately imposes compensation expressed as a percentage and asks you to immediately return the vehicle.
Finally, we advise you to consider appropriate leasing insurance in addition to your contract, if it does not include them by default. Otherwise, in the event of destruction or theft of your car during the contract period, you will not only have lost your vehicle but will also be required to pay all the remaining rents.
Sellers who offer cheaper LOA: Elite-auto – Aramisauto – Auto-IES
Long Term Rental (LLD)
Long-term rental or LLD is a simple car rental formula that allows an individual or a professional to have a new and state-of-the-art vehicle at their disposal without having to buy it. He can therefore use the car as he pleases, without owning it. He only pays a monthly rent to benefit from it. This sum paid covers the rental of the car, any repairs, maintenance, assistance, and insurance. In most cases, rental companies determine the amount of the monthly installments to be paid according to certain criteria such as the duration of the rental, the type of vehicle, the insurance and maintenance included or not, the kilometers traveled, as well as any additional services.
In the LLD, the contract does not specify any purchase option. But, you have the right to propose to the lessor to buy the vehicle, a few weeks before the end of your contract. But in this case, the purchase price of the vehicle becomes higher. This formula is interesting for many reasons. You should first know that a new car model shows a loss of 25% of its value after one year of use. It is therefore the owner of the vehicle who supports it. In addition, you will not have to bear the costs of maintenance, assistance, and repair of the vehicle. That’s not all: during a long-term rental, the lessor does not require any prior contribution (LLD without contribution).
