Long-term rental for companies – is it worth it?
The most common form of financing a car in a company is leasing. However, more and more companies decide to cooperate with a car rental company and rent it long-term. Is renting a car by a company for a longer period of time an option worth considering? Check it out!
Car Fleet Management (CFM) is rapidly gaining popularity. Especially among large enterprises and international corporations based in Poland. Owners of companies from the small and medium-sized enterprise sector, and even sole proprietors, are also convinced by this form of financing car purchases.
The growth in interest is visible in the numbers. Statistics show that in Q3 2018 alone, when companies acquired nearly 100,000 new cars, every fifth (21%) was financed through long-term rental. Year-on-year, this meant an almost 37 percent increase in interest in this form of financing car purchases. The growth is also partly due to the increasingly widening possibilities of rental. Companies can rent cars long-term from entities associated with the Polish Vehicle Rental and Leasing Association (PZWLP), as well as from rental companies such as MobiCars.
Although long-term car rental by companies is gaining popularity, Poland is still far from Western Europe, where long-term car rental accounts for up to 80% of company fleets.
In principle, long-term rental is an operational lease with full or partial service of the rented cars. The entrepreneur pays the entity renting the car for the use of the vehicle under the terms specified in the agreement, but is not its owner. Therefore, the monthly fee goes towards not only the rental, but also the service of the car by a specialized external company, which can provide, among other things:
In such cases, long-term rental is much more attractive than leasing. The latter is merely a form of financing the car, and the issues related to maintenance fall on the entrepreneur.
The owner of the company who has decided to rent a car long-term can terminate the contract at any time without exposing himself to high penalties. However, such situations occur sporadically, because monthly and fixed installments allow you to plan your budget in advance.
Long-term rental is certainly an interesting choice for an entrepreneur. They are exempt from the costs of car maintenance, and in the event of a breakdown, they receive a replacement car. In turn, monthly installments for a rented car, similarly to leasing, can be included in the costs of obtaining income. At the same time, they save the money that they would spend on buying a new car, and at the same time do not lose their creditworthiness. Long-term rental also does not require the payment of an initial fee, which is an element of leasing. Another financial benefit is the lack of depreciation costs.
The main difference between long-term rental and leasing is the fact of ownership of the car. After the contract ends, the car is returned to an entity associated with the PZWLP or a car rental company, e.g. MobiCars. In the case of leasing, the car is an asset of the company. Considering the depreciation of the car, and the costs associated with its use throughout the leasing period, this does not have to be an advantage at all.
Long-term car rental is therefore one of the best ways to finance the purchase of a car. It is undoubtedly a better option than a car loan. It is certainly not inferior to financial leasing in many areas. It seems logical that over the next few years, long-term rental will become even more popular and a wider group of entrepreneurs, including those running sole proprietorships, will take advantage of this option of financing the purchase of a car.
