Arval Hungary - Benefits of Operating Leases vs Outright Purchase

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Why operational leasing? > Comparison > Benefits of Operating Leases vs Outright Purchase

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Comparison

Benefits of Operating Leases vs Outright Purchase

Discover why Operational Lease is different from other financing methods.

Operational Lease is a vital tool for your business. It improves the business cash flow, reduces the depreciable capital and spreads the expense over the entire leasing period. What about the other market alternatives?

Employee & Employer

S.No	Feature	Outright Purchase (Buy Outright or via a Loan)	Operational Lease Benefits
			Employer	Employee
1	Cash outflow	Buy: Entire amount is paid out upfront Loan: Higher outflow due to 100% repayment of loan	Minimum cashflows due very high rear end residual value	Same
2	Company Car Option	Expensive. Only to limited number of employees. FBT on entire Gross Block.	Small Monthly Operating Lease Rental. FBT is only on the car Lease Rental amount	More employees can be covered due to higher affordability of small monthly rentals No Tax to employee on Company car.
3	Depreciation vs Revenue expense	Lower: Set at 15% WDV	Higher: Monthly Rental completely expensed off to Profit and Loss Account	NA.
4	Non core Asset	Assets On Balance Sheet	Assets Off Balance Sheet	NA.
5	Sale and Lease Back	NA.	Existing corporate owned cars can be taken off balance sheet through an arms length Sale and Lease Back transaction	Employee own vehicle can be acquired and converted into Operating Lease in same manner.
6	Disposal of car	Risk of Resale Value remains with the Corporate Hassles of car disposal	No Risk on Resale Value as this is borne by Arval Phone Arval and we collect the car at contract end	Employee has option to buy vehicle at contract end
7	Service repair maintenance	Non core activity of Corporate Administrative hassle of monitoring + processing invoices. Costs vary across the country Budgetary uncertainty Ressources couldn't be available for more added value tasks	All inclusive costs managed by Arval. Reduced administrative hassle. Full Outsourcing Benefits Cashless transaction. Benefit from expert advice Fixed costs per month Easier cost allocation within Coporate	Same Tax free benefit Just calls Arval to book all Service and Maintenance requirements
8	Insurance & Accident Management	Non core activity of Corporate. Administrative hassle Expertise required for handling Insurance/Claims and Bodyshops Ressources couldn't be available for more added value tasks	Reduced administrative hassle. Outsourcing Benefits. Cashless transaction. Benefit from Arval expertise Quality of workmanship impacts sale proceeds	Same Tax free benefit
9	Relief Vehicle	Additional cost Uncertainty of mobility Ressources couldn't be available for more added value tasks Non core activity corporate	Included as a value added service Mobility assured	Same Tax free benefit
10	Depreciation Cover (Dep Cover)	Insurance claim shortfall to be borne by Corporate	Risk taken by Arval	Same Tax free benefit
11	Roadside Assistance	Corporate potentially involved as vehicle owner Ressources couldn't be available for more added value tasks	Included as an value added service 24x7	Tax free benefit
12	Financial Balance Sheet Ratios	Cars being Non performing assets, Lower ROCE & RONA for the Corproate + Shareholders	Being off Balance Sheet, RONA will increase sharply. Lower cash-out flow shall also improve ROCE.	NA.