car leasing project

8/13/2019 Car leasing project

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Table of Contents

Table of Contents.................................................................................................................2Introduction..........................................................................................................................3What is car leasing?.............................................................................................................4What are the Advantages of Leasing?.................................................................................5o! About "isadvantages?.................................................................................................#o! Car Leasing Wor$s......................................................................................................%Ca&itali'ed Cost (Ca& Cost).................................................................................................*

Ca&itali'ed Cost +eduction..............................................................................................*+esidual ,alue.....................................................................................................................-one/ 0actor.....................................................................................................................1Lease Ter (onths).........................................................................................................11T/&es of Car Leases .........................................................................................................12

Closedend Leases.........................................................................................................12&enend Leases............................................................................................................13usiness Leasing............................................................................................................13

6uridical regulations on leasing

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+oanian leasing regulations .......................................................................................13International Leasing +egulations........................................................................................................................................15

Conclusion.........................................................................................................................1#Anne7.................................................................................................................................1%ibliogra&h/......................................................................................................................2

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Introduction

Leasing is a &rocess b/ !hich a fir can obtain the use of a certain fi7ed assets for

!hich it ust &a/ a series of contractual8 &eriodic8 ta7 deductible &a/ents. The lessee is the receiver of the services or the assets under theleasecontract andthe lesser is the o!ner of the assets. The relationshi& bet!een the tenant and the landlordis called a tenanc/8 and can be for a fi7ed or an indefinite &eriod of tie (called the terof the lease). The considerationfor the lease is called rent. Agross leaseis !hen thetenant &a/s a flat rental aount and the landlord &a/s for all &ro&ert/ charges regularl/incurred b/ the o!nershi& fro la!no!ers and !ashing achines to handbags and9e!elr/.

:nder noral circustances8 a freehold o!ner of &ro&ert/ has the libert/ to do!hat the/ !ant !ith their &ro&ert/8 including destro/ing it or hand over &ossession of the&ro&ert/ to a tenant. o!ever8 if the o!ner has surrendered &ossession to another (thetenant) then an/ interference !ith the ;uiet en9o/ent of the &ro&ert/ b/ the tenant inla!ful &ossession is unla!ful.


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What is car leasing?

What is leasing? It is a slightl/ odified for of loans. If /ou need to bu/soething8 /ou can borro! a certain aount of one/ fro the ban$ and bu/ the &roductin ;uestion. When leasing8 the leasing co&an/ &a/s /our &roduct in ;uestion8 !hichthen &a/ it in installents. +ates are lo!er than !hat /ou &a/ for a car loan8 and aount of advance is alsosaller. +ates are set according to ar$et &rice of the car8 the interest argin !ear (thedegree to !hich the car !ill lose value over its use)8 etc. At the end of =rent= /ou can bu/&roduct at a ver/ lo! &rice and thus finall/ becoe the rightful o!ner of the car.r8 if /ou changed /our ind8 /ou can do a lease for another car. The ethod is calledbac$ and bu/ one of the big advantages of leasing. When /ou bu/ a car !ith either full

&a/ent or in installents8 /ou becoe the o!ner. Are /ou stuc$ !ith that car? A leasing is uch ore convenient because /ou can renegotiate and change thebrand of car. The onl/ condition is to coe fro the sae dealer. Car dealers in +oania!or$ing !ith an/ 5# leasing co&anies8 and the s/ste can be a&&lied and used cars8not onl/ for authori'ed dealers.

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What are the Advantages of Leasing?

Lower Monthly Payments

ecause /ou onl/ &a/ for the &ortion of the car or truc$ that /ou actuall/ use8 /ouronthl/ lease &a/ents are 3>#> lo!er than for a &urchase loan for the sae carand sae ter.

No own Payment

Car leasing &rovides the o&tion of a$ing no do!n &a/ent8 although /ou uststill a$e the first onths &a/ent and official tag and registration fees.


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o! About "isadvantages?

The &ossible disadvantages of car leasing are the follo!ing

+arly Termination Cost

If /ou ust terinate /our lease before the end of /our contract8 the cost is usuall/ver/ high8 uch higher than ight be e7&ected. o!ever8 cost can be inii'ed b/a$ing the right terination choices. ost &eo&le end their lease on schedule and do notend earl/8 !hich avoids all earl/ terination costs.

Little or No "wnershi& +,uity

The tradeoff for lo! onthl/ lease &a/ents is that /ou t/&icall/ do not buildo!nershi& or tradein value in /our leased vehicle. o!ever8 it is fairl/ coon that thear$et value of a vehicle at leaseend is higher than the &urchase o&tion &rice s&ecifiedin the lease contract B !hich eans /ou a/ have soe e;uit/ trade value. Its notunusual to end u& !ith a fe! thousand dollars of une7&ected e;uit/.

+(cessive Mileage Charges

If /ou e7ceed the ileage allo!ance in /our lease contract8 /ou !ill be charged forthe e7tra iles at a s&ecified &erile rate8 usuall/ a reasonable .2 &er ile. A large

ileage e7cess could result in a heft/ charge8 even at a reasonable &erile rate. @ou canreduce /our e7&osure if /ou =bu/= the e7tra iles /ou e7&ect to drive at the tie of leasesigning. @ou avoid the higher endoflease charge this !a/. If /ou choose this o&tion8/ou !ill be refunded for an/ unused iles.

+(cessive Wear'and'Tear Charges

If /ou return a leased vehicle at leaseend !ith e7cessive dents8 scratches8 orunre&aired accident daage8 /ou !ill be charged B because those daages reduce thevehicles value. ost lease co&anies clearl/ s&ecif/ !hat is considered =e7cessive= sothat /oull $no! if /ou should get it re&aired before returning /our vehicle. Det there&airs done /ourself before /ou return the vehicle and avoid being charged

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$ow Car Leasing Wor-s

0irst8 lets do a!a/ !ith a coon isunderstanding about car leasing carleasingis not the sae as car renting. Car renting and leasing are t!o totall/ different businessconce&ts. Autoobile leasing is based entirel/ on the conce&t that /ou &a/ for the aount b/!hich a vehicles value de&reciates during the tie /oure driving it. "e&reciation is thedifference bet!een a vehicles original value and its value at leaseend (residual value),and is the &riar/ factor that deterines the cost of leasing. The saller the difference8the lo!er the lease &a/ent8 and the better the deal. If /ou consider t!o different brand cars8 both costing 28 !hen ne!8 !here

one is !orth 158 after t!o /ears and the other !orth onl/ 1288 the first car !illcost less to lease because of its saller de&reciation aount B and saller differencebet!een initial cost and leaseend value. "ifferent a$es and odels of vehicles can have draaticall/ differentde&reciation rates. ,ehicles having the lo!est de&reciation a$e the best lease deals.Denerall/8 Euro&ean and 6a&anese a$es have lo!er de&reciation than Aerican brands.onda8 To/ota8 and ,ol$s!agen have consistentl/ held lo! de&reciation ratings (highresale values)8 as have ercedes8 Le7us8 and other lu7ur/ brands.

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Ca&itali'ed Cost (Ca& Cost)

When /ou and /our dealer sit do!n and agree on a &rice for a leased car8 thisbecoes theca&itali'ed cost8 or =ca& cost.= In a good lease deal8 the ca& cost !ill besignificantl/ less than


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+esidual ,alue

The !holesale !orth of a car at the end of its lease ter8 after it has de&reciated8 iscalled its residualvalue8 soeties called =resale value.= The higher the residual value8the ore the car is !orth at leaseend B and the lo!er /our lease &a/ents. of for 3# onths8 then to 44> for 4* onths8 and 3-> for # onths.+esiduals fall ra&idl/ in the first 24 onths8 then ore slo!l/ in later onths. This is!h/ shorter ter leases are ore e7&ensive than longer leases. The best cars to lease are those whose ./'month 0. years1 residuals are at least234 of their original M56P value7

+eeber8 the higher the residual8 the lo!er the lease &a/ents. This is not to sa/that cars !ith lo!er residuals cannot be good lease deals8 its 9ust that /ou get ore carfor /our dollar !ith the highresidual odels.

Lease co&anies often artificiall/ raise residual values on &articular vehicles forliitedtie &rootions to a$e leasing ore attractive. Denerall/8 residuals set b/ caranufacturers finance co&anies (0ord Credit8 onda 0inancial


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one/ 0actor

When /ou lease8 /oure t/ing u& the leasing co&an/s one/ !hile /oure drivingtheir car. +eeber8 the/ s&ent their one/ to bu/ /our car fro the dealer so that the/could lease it to /ou. The/ rightfull/ e7&ect /ou to &a/ interest on that one/8 the sae

as !ith a loan.This interest is e7&ressed as aone/ factor8 soeties called lease factor, leaserate8 or si&l/ factor,and is s&ecified as a sall decial nuber such as .2-%.one/ factor can be converted to annual interest rate (AF+) b/ ulti&l/ing b/ 24. 0ore7a&le8 a one/ factor of .2-% ulti&lied b/ 24 %.13> AF+7 AF+)8 or lo!er. o!ever8 /ou a/ not ;ualif/ for these great one/ factorsunless if /ou have a s&otless8 or near s&otless8 credit rating. Credit re;uireents forleasing are soe!hat stricter than for &urchase loans because of higher ris$s to thefinancial co&an/. If /our credit histor/ is fla!ed8 even if its a ista$e8 /oull &a/ a higher one/

factor finance rate B or not be able to lease at all. Its al!a/s advisable to $no! /ourcredit score before /ou visit a dealer. @ou can get /our ost recent credit score online .If /ou s&ot &robles8 get the resolved !ith the credit re&orting agenc/ as soon as&ossible. ista$es on /our credit histor/ can haunt /ou for u& to 1 /ears. Hote that one/ factororinterest rateis not re;uired b/ la! to be sho!n in leasecontracts.


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Lease Ter (onths)

Lease termis the length of tie a car is leased8 usuall/ e7&ressed in nuber ofonths. T/&ical leases are 248 3#8 or 4* onths8 although =oddball= ters8 such as 383-8 and 42 onths are fre;uentl/ used. These odd lease ters are generall/ designed tohave /our lease end and get /ou bac$ into the sho!roo during a slo! sales &eriod. Although longer leases &roduce soe!hat lo!er onthl/ &a/ents8 it a/ besarter to choose a shorter lease ter.

Choose a lease term that8s no longer than the general coverage 09bum&er'to'bum&er91 warranty 0not 9drive train9 warranty1 that comes with your vehicle . That!a/8 /oure covered for the entire duration of the lease if soething brea$s. 0or e7a&le8if a vehicles =bu&ertobu&er= !arrant/ is 3# onths8 dont lease for longer than 3#onths. an/ a9or vehicle &robles start in the fourth or fifth /ear. 0or this reason8 #onth leases8 !hich are declining in &o&ularit/8 are not recoended e7ce&t for thosefe! brands that have unusuall/ long !arranties (/undai 5 /ears).

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Ty&es of Car Leases

Autoobile leases coe in t!o varieties: Closedend and &enEnd70ederal regulations re;uire that the t/&e of lease B o&en or closed B be clearl/

indicated on all car lease contracts7"ealer sales&eo&le t/&icall/ dont have this level of understanding of leases.


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be driven in rough or abusive conditions8 and that the vehicles value at end of the lease(the residual value) is therefore soe!hat &redictable. At the tie /ou lease8 the leasing co&an/ estiates the vehicles leaseendresidualvalue based on the e7&ected nuber of driven iles. If the vehicle is actuall/!orth less than the residual !hen /ou turn it in8 the leasing co&an/ ta$es the financial

hit,not /ou.n the other hand8 if the vehicle is !orth ore than the residual8 and /ou have theo&tion to &urchase8 /ou a/ !ant to bu/ the vehicle and $ee& driving it B or sell it anda$e a &rofit. This ha&&ens fre;uentl/.

Open-end Leases

&enend leases are used &riaril/ for coercial business leasing. In this casethe lessee8 not the leasing co&an/8 ta$es all the financial ris$s8 !hich is not so uch a&roble for a business8 since the cost can be e7&ensed. Annual ileage on a businesslease is usuall/ uch greater and less &redictable than the average 128 iles&er/earof a nonbusiness lease.

In o&enend leases8 /ou are res&onsible for &a/ing an/ difference bet!een theestiated leaseend value (the residual) and the actual ar$et value at the end of thelease. This could aount to a significant su of one/ if the ar$et value of /ourvehicle has dro&&ed or /ou drive an/ ore iles than e7&ected. ften8 the residual foran o&enend lease is set uch lo!er than for a nonbusiness closedend lease8 !hichreduces the leaseend ris$8 but can significantl/ increase the onthl/ &a/ent aount.

Business Leasing

Although there are siilarities8 there are also an/ differences. Evaluation of abusiness lease is best handled b/ a ta7 accountant or business finance advisor !ho isfailiar !ith details of the business and its financial ob9ectives.

;uridical regulations on leasing

Romanianleasing regulations

:nder legal relationshi&8 leasing o&erations fall under the Civil Code !hichalthough it does not include s&ecific rules for this ode of financing8 it has still a nuberof general &rovisions relating to the ters of the agreeents bet!een the Contracting

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Farties and the t/&e of goods !hich are covered b/ the contract. In this !a/8 the leasecontract is vie!ed as a =suis generis= to !hich it a&&lies soe s&ecific rules. The ain regulations governing leasing o&erations in +oania areK D%2J2.2.1--3 !hich &rovides that the i&orted goods under a lease are consideredin custos regie of te&orar/ i&ort for the duration of the contract. The goods user

ust &rovide a ban$ guarantee in favor of Custos for dut/ due8 calculated on the&urchase &rice of the &ro&ert/. At the end of the lease8 there !ill be done the goodsclearance and &aid custos dut/ calculated on the residual value.K D12J31.1co&letes .1--5 D%2J1--38 eliinating the obligation to guarantee theduties. ut i&oses the follo!ing conditions goods are intended for &roduction8 be noolder than 2 /ears and the &eriod of lease to be u& to 3 /ears. A onth before the leasee7&ires8 the user ust notif/ the custos authorities in the &a/ent of custos duties and,AT on residual value. The ,AT schee in leasing o&erations is governed through .D.3J1%.1.1--5 b/the a&&roval of the rules for the a&&lication D3J1--2 considering ,AT. At art.*.1 it is &rovided that the i&orted goods that entered the countr/ in leasing

sub9ect ust &a/ the ,AT to the user8 according to the aounts and &eriods8 then at thee7&iration of the lease &eriod8 the goods &ass to the users &ro&ert/. At art.11.1% it is &rovided that for the i&orted goods that are under the custos&rocedure sus&ends te&oraril/ the collection of custos duties8 the i&orter beingobliged to guarantee and &a/ ,AT. The inistr/ of 0inance a/ grant e7e&tion frothe o!ed ,AT according to the e7isting regie for custos duties.K D51J2*.*.1--% on leasing o&erations and leasing co&anies8 &rovides that the !or$of the leasing co&anies !ill be authori'ed b/ the inistr/ of 0inance8 in !hich shall beestablished on an uns&ecified date The ffice for leasing o&erations. The offenses and&enalties for nonco&liance8 &rovided b/ the &rovisions of Article 148 sa/ that theleasing co&an/ !ill not have the right to carr/ out leasing o&erations until it !ill obtainthe a&&roval of the inistr/ of 0inance and !ill be liable to a fine of at least 1> of thevalue of contracts e7ecuted.K La! -J1--* for the a&&roval D51J1--% of leasing o&erations and leasing co&aniesodif/ soe articles of the ordinance8 but !ill still have soe inconsistencies8 as inArticle 2. Frovides that the user is one !ho !ill a$e a fir offer to!ards the leasingco&an/. Art.%. re;uires the de&reciation regie to be established 9ointl/ b/ the &arties8de&ending on the nature of good and its in&ut value in accordance !ith La! 15J1--4regarding the aorti'ation of ca&ital iobili'ed in tangible and intangible assets.The advantages of this la! are the regulating of the establishent of leasing co&aniesbecause the/ are established and o&erate according to La! 31J1--. Article 1*8 &aragra&h1 of D51 sa/s that the offences and &enalties for leasing co&anies is re&ealed. In art.2# regulations relating to ovable &ro&ert/ i&orted for use in the leasing s/ste arealso odified8 eliinating the obligation to &a/ aounts related to i&ort duties8including custos guarantees. The bu/er is obliged to &a/ custos dut/ calculated on theresidual value of the &ro&ert/. a7iu &eriod of the lease for i&orted goods is %/ears. Fublicit/ and advertising are included in all the e7&enses. Industrial andconstruction e;ui&ent can be used in leasing s/ste b/ several co&anies if the/

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signed a contract bet!een the &ur&ose of a$ing an investent or to their coonusage.K La! --J1---8 !hich aends Title II D Ho 51J-% defines the s&ecific ters of leasingactivit/8 such as in&ut value8 total value8 the rate of leasing8 financial leasing ando&erational leasing8 and conditions that a/ end the t!o t/&es of leasing. It introduces a

ne! cha&ter =Leases= in stating the defining eleents for both o&erating leases and thefinancial sectors. 0or incoe earned in +oania b/ foreign legal entities a$es it clearthat the/ are ta7ed in +oania !ithholding under the double ta7ation conventions. A ne!eleent in custos regulation of i&orts of goods sub9ect to a lease8 i&orted underte&orar/ adission custos or i&ort custos regie8 the iniu residual value of2> of the value of the &ro&ert/. Article , &rovides for iniu ca&ital subscribed and&aid for leasing co&anies to 5 illion8 and o&erating their terination right if !ithin12 onths after &ublication of this la! in the fficial Da'ette does not co&l/ !ith the&rovisions entioned.K Title ,I of La! --J1--- !hich regulates the legal status of the &ledge8 and refers toleasing o&erations for ore than a /ear8 enuerating the goods sub9ect collateral.

International Leasing Regulations

The global s&read of lease created the need to regulate their civil. "ifferent rulesa&&lied b/ soe countries have led to uncertaint/ in the international ar$et of leasing. n 2* a/ 1-** in tta!a8 under the aegis of :nidroits financial leasing !asregulated. The &ur&ose of this decision !as to forulate a coon legislative base8

!hich is the resolution of an/ dis&utes during the develo&ent of international leasingcontracts. :HI"+IT Convention


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:HI"+IT regulations a/ e7clude the a&&lication onl/ !hen signed b/ all&artici&ants and signatories of the lease shall be understood in this sense. Article 3 refers to the fact that the Convention a&&lies !hen the lesser and the userare located in different states. Contract e7clusions are contained in Article 5. =The a&&lication of this Convention

a/ be e7cluded onl/ if each &art of the su&&l/ contract and each &art/ agree to lease itse7clusion.= :nder Article - of :HI"+IT8 the :ser is obliged to aintain &ro&er contractob9ect8 use it for the &ur&ose of the contract and $ee& hi in the for in !hich to receivedeliver/8 ta$ing into account noral !ear his or changes &reviousl/ agreed b/ the &arties.A basic &oint of regulation is the fact that in addition to leasing co&an/ and the user cane7ercise his right to the incubent &rovider of !arrant/ validit/ &eriod of the ob9ect.+ight includes the &ossibilit/ for the return of the !arrant/ &eriod under the deliver/contract signed or declaration of nullit/ of the contract. The user is not entitled to !aiverof contract. Alin.13 regulation &rovides that in case the user does not co&l/ !ith the contract8

the leasing co&an/ has the right unilaterall/ to terinate the lease !ith daages. Thedaages include the aount of reaining lease rates to be &aid until the lease e7&ires. Itis !orth entioning that the leasing co&an/ a/ e7ercise this right due to &reviousl/!arn users b/ &roviding !a/s of solving the &roble arising.


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Anne(

Lease Contract

Art 1. CHT+ACTIHD FA+TIE< Co&an/ ........................ based on...........


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citi'en ................... o!ner of the I" J &ass&ort no. ............. as the location and Co&an/.......................... located in.............


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resulting fro the !or$sho&s that are not authori'ed location are the e7clusiveres&onsibilit/ of the :


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the lesser enters into account the aount of residual value. Article 15. A6+ 0+CE a9or force arising after the contract !hich &revents or dela/s the total J &artial&erforance of the contract &rotects fro liabilit/ the &art/ could not eet itsobligations in this case for the &eriod in !hich such fulfillent is &revented or

dela/ed8 according to art. 1*21*3 Civil Code. Freceding Article shall not a&&l/ if the &art/ claiing force a9ored !as indefault. 0orce a9ored eans an une7&ected and unavoidable event8 inde&endent of the&arties !ill &revent dela/ or total J &artial fulfillent of contractual obligations8 suchas a natural disaster8 fire obili'ation8 re;uisition8 insurrection !ar. The stri$e !ouldnot be considered force a9ored. The &art/ claiing force a9ored is obliged to9ustif/ the other &art/8 !ithin 5 da/s of the occurrence of force a9ored8 its e7istence8b/ !ritten notice acco&anied b/ docuentar/ evidence8 confired b/ the Chaberof Coerce and Industr/ of +oania. If notification is not sent under the conditions set8 the fault is located in the

other &art/ res&onsible for daage caused b/ not &roved the e7istence of forcea9ored. Article 1#. CHT+ACT "I0ICATIH Changing the contract is in agreeent !ith addendu signed b/ both &arties. Article 1%. 0IHAL F+,I


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car leasing project

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