Operational Leasing is a vital tool for your business. It improves your company cash flow, reduces the depreciable capital and spreads the expense over the entire leasing period. What about the other market alternatives? Discover why Operational Leasing is different from other financing methods.

• The company buys the vehicle with its own cash or via some other form of finance eg loan
  Purchasing a vehicle by using equity generally means that your company has significant cash reserves. We consider that using equity in this manner undermines what equity should be used for in a business and in using it in this way has a negative impact on the return on equity required by the shareholders. If the company buys the vehicle with borrowed funds, it will incur financial expenses and ultimately diminish its borrowing capacity for more important investments like plant and stock.  In this method of funding all risks on the vehicle remain with the company. 
  
  
• The company leases the vehicle via a finance lease
  In finance lease the risks relating to the asset are virtually transferred to the lessee (the user) as if they had bought the vehicle outright - as above. During the term of the finance lease the user will generally have paid for the full value of the vehicle and will bear the risk should the sale value of the vehicle not match the final balloon payment agreed at the commencement of the lease.  Furthermore because the user carries the residual value risk the vehicle must be shown on the users Balance Sheet.
  
  
• The company uses the vehicle under an operational lease
  An operational lease is not financing, but a lease. The company buys a service, and therefore will never own the vehicle. As there is no ownership then the vehicle and the lease is an off balance sheet item.
  The company makes monthly payments that cover not only the use of the vehicle but also all the services required to use the vehicle: maintenance, assistance, tyre replacement, etc. These payments depend on the model of vehicle chosen, the length of the contract and anticipated kilometres and the associated services chosen.