{"id":9690,"date":"2019-08-09T09:00:14","date_gmt":"2019-08-09T07:00:14","guid":{"rendered":"https:\/\/my-life.lu\/?p=9690\/"},"modified":"2021-01-08T10:25:38","modified_gmt":"2021-01-08T09:25:38","slug":"financial-or-operational-leasing-which-is-right-for-you-58009","status":"publish","type":"post","link":"https:\/\/my-life.lu\/en\/financial-or-operational-leasing-which-is-right-for-you-58009\/","title":{"rendered":"Financial or operational leasing: which is right for you?"},"content":{"rendered":"
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If you have the option to lease a vehicle, that\u2019s great news! But should you choose financial or operational leasing? What features do these two types of product offer? myLIFE met the experts with all the answers.<\/p>\n

Many companies in Luxembourg have remuneration policies that include benefits in kind (meal vouchers, company cars, private pension scheme contributions, etc.). In 2018*, no less than 26% of employees living in Luxembourg received some form of benefit in kind, and of those 8% had a company car they could use outside of work. In fact, cars were the most common benefit available to executives and directors in the Grand Duchy.<\/p>\n

Every organisation draws up its own policy on company vehicles. A CEO\u2019s decision to opt for operational and\/or financial leasing will depend on their goals and HR policies (category of employees eligible, conditions of access, etc.).<\/p>\n

So, how do operational and financial leasing actually differ? Let\u2019s scratch beneath the surface to explore the features of these two types of product.<\/p>\n

Operational leasing<\/h2>\n

Operational leasing is an \u201call-inclusive\u201d product. The beneficiary\u2019s monthly lease payment entitles them to use the vehicle for a set period of time during which all charges are covered.<\/p>\n

An all-inclusive service… with limits<\/span><\/p>\n

An employee with an operational lease can use their vehicle for professional and private travel for the duration of the agreement. The lease covers the vehicle and associated charges such as the rental and financial depreciation of the vehicle, comprehensive (\u201cCasco\u201d) insurance, circulation tax and breakdown assistance. Some agreements may cover tyres, maintenance, repairs and even fuel.<\/p>\n

This type of product offers a certain degree of peace of mind, but users are also bound by specific terms. For instance, penalty charges will apply if they terminate the lease early or exceed the maximum mileage authorised in the agreement.<\/p>\n

Plus, the fact that they don\u2019t own the vehicle means that they can\u2019t make any changes to it (such as tuning) and must use it with due prudence. The lessee can be charged for any damage not considered normal wear and tear (which generally depends on the age and mileage of the vehicle); they may also be expected to pay cleaning fees.<\/p>\n

In principle, there is no option to purchase the vehicle at the end of the agreement<\/span><\/p>\n

In principle, there is no option to purchase the vehicle at the end of an operational lease agreement. At the end of the agreement, the vehicle is returned to the lessor for sale on the second-hand car market.<\/p>\n

If you choose operational leasing, the vehicle and associated charges will be covered but there will be no automatic option to purchase the vehicle at the end of the agreement.<\/em><\/p><\/blockquote>\n

Remember<\/strong>: the lessee must make fixed lease payments. These depend on the term of the agreement and the mileage and services offered. The monthly payments on an operational lease also depend on the vehicle\u2019s estimated resale value, which reflects the reputation of the manufacturer and the car\u2019s specs, among other factors.<\/p>\n\n\n\n
Leased vehicles and Belgian cross-border workers<\/strong><\/p>\n

\u201cIf a Belgian cross-border worker with a foreign lease agreement is stopped by the Belgian authorities within Belgium, they must produce their employment contract and the vehicle provision agreement signed by their employer. We recommend that you keep these in the vehicle at all times,\u201d says Olivier Wuilmus, Fleet Manager at BIL Lease. \u201cAlso,\u201d he continues, \u201cfor your spouse to drive your leased car, they must now be able to show the authorities a household composition certificate upon request.\u201d<\/p>\n

These requirements do not apply to German or French cross-border workers.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Financial leasing<\/h2>\n

A financial lease<\/strong><\/span><\/a> agreement comes with an option to purchase the vehicle at the end of the lease. The beneficiary\u2019s lease payment entitles them to a vehicle that they can use for all of their journeys over a set period of time.<\/p>\n

This is a financial product, so none of the ancillary services offered under an operational lease are included. The lease payment amount covers the financial depreciation of the vehicle, financial charges and sometimes insurance. It reflects the value of the asset and doesn\u2019t take mileage into account.<\/p>\n

Purchasing terms and conditions<\/span><\/p>\n

A financial lease comes with the option to purchase the vehicle at the end of the agreement. The client has to pay the residual value of the vehicle, which theoretically equates to 10% of the initial investment.<\/p>\n

\u201cThe client knows how much the vehicle will cost to buy from the outset,\u201d stresses Charlotte Lies, Director of BIL Lease. \u201cLet\u2019s suppose that the client chooses a vehicle that costs \u20ac50,000 before VAT. The residual value at the end of the agreement will be \u20ac5,000. The client then has two options:<\/em><\/p>\n