August 23, 2017 Leasing is a popular form of financing. Both companies and individuals can use this option. A large proportion of entrepreneurs lease cars due to tax breaks. A car loan at a bank has a relatively low interest rate, however, people with a very good BIK rating can use the service. On the other hand, the offer of loan companies is addressed to people with low incomes. 

What is leasing?

What is leasing?

Leasing is a form of agreement between the financing party (e.g. a bank) and the beneficiary (business activity, natural person), under which the lessee uses the item that belongs to the lessor for a fee. The most frequently leased items are cars, industrial machines and office equipment. The third entity that is worth paying attention to is the seller, i.e. the seller (e.g. a car dealership).

What is car leasing? The bank buys a car from a dealer on fairly preferential terms. Then he leases the vehicle to the consumer (consumer leasing) or business activity. In exchange for a monthly fee, the lessee has the right to use the car. Leasing usually lasts 3 or 4 years. After this period, the user has the right to buy a car or lease another vehicle.
The most popular types of leasing agreement include:

  • Direct leasing – the lessee directly leases the item from the seller. The contract includes only two entities, excluding the leasing company.
  • Indirect leasing – the lessee leases the item from the seller, via an intermediary (leasing company or bank).

Operating and financial leasing – tax differences

Operating and financial leasing - tax differences

In the case of leasing, it is worth considering the concept of depreciation write-offs. The car wears out over time, which means that it loses value. Therefore, at the time of signing the leasing contract, it is worth determining the cost of using the fixed asset. Thanks to depreciation, you can write off the amount of consumption into operating costs. Leasing can be divided into operational and financial. Entrepreneurs more often decide on operational leasing due to the shorter duration of the contract and more favorable tax conditions.

Operating leasing and VAT

Operating leasing and VAT

In the case of operating leasing, the lessor is responsible for the depreciation. This is because the financing entity is the actual owner of the vehicle. However, the lessee can enter the amount of installments (including VAT) in the costs of doing business. It is worth noting that the user has the right to buy the vehicle after the end of the leasing period.

Financial leasing and VAT

Financial leasing and VAT

However, financial leasing is characterized by the fact that the lessee is obliged to make depreciation write-offs. In this case, the car is entered into the list of assets of the lessee. Therefore, the user can enter only interest on installments for tax deductible costs. What’s more, VAT is paid once, in full. At the end of the contract, the lessee becomes the owner of the vehicle.

Leasing and tax deductible costs

Leasing and tax deductible costs

In a situation where the leased car is used only for corporate purposes, the tax deductible costs (BUY) include 100 percent. VAT and installments. However, if the vehicle is used for private purposes, then the BUY includes the installment and 50 percent. VAT. It is worth noting that BUY is fully counted as own contribution.

Car loan – for high earners only

Car loan - for high earners only

You should be aware that banks most often grant loans for new cars. It is also worth noting that the consumer must have a positive credit history and have high BIK scoring. Moreover, in the case of a loan for natural persons, banking institutions direct their product to employees employed under an employment contract for an indefinite period.

Loans for companies are directed at enterprises that show profits and have a good financial standing. In addition, the procedure for applying for a banking product is quite complicated, because the client must prepare a number of documents in order to take a loan.

Banks grant relatively high car loans, up to 450,000 zł. The interest rate is quite low. However, the repayment period can be up to 120 months. It is worth noting that by taking out a loan from the bank you can get discounts for the purchase of the OC / AC insurance package. This form of repayable financing is reserved for people with a stable financial situation.

Entering a car loan in the cost of business

Entering a car loan in the cost of business

The payer may enter part of the cost of the car loan into the activity if the vehicle has been entered as a fixed asset. BUY includes only interest on the loan received. Costs do not include loan installments, but the so-called depreciation write-offs. Interestingly, the vehicle owner may include in the cost all expenses related to the operation of the vehicle – fuel, service, etc. (provided that when the car is introduced as a fixed asset its value will be lower than PLN 3500).

However, VAT can be deducted at the time of purchase – 50 percent. However, another 50 percent the taxpayer settles under car depreciation.

A loan at a non-bank institution for people without creditworthiness

A loan at a non-bank institution for people without creditworthiness

Non-bank institutions grant car loans to both companies and individuals. The financial liquidity of the entity that is applying for a loan is not as important as in the case of the bank. Therefore, about the so-called repayable financing can apply to those in debt and with poor credit history in the bases.
Car loans without BIK do not exist. It is worth noting that loan companies check the presence of a potential customer in databases (BIK, BIG InfoMonitor, KRD, ERIG), but in this aspect they do not have such stringent requirements as banks. What’s more, young companies that have been operating for at least 24 hours can apply for a loan against collateral or for buying a car.

For example, the company Auto Financef directs its product to people without fixed remuneration, because it does not require income certificates. Therefore, unemployed people can apply for a loan. This is because the loan is secured by the car you bought.

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