Vehicle leasing has proven itself as a form of financing for vehicle fleets. A basic distinction can be made between two types of leasing: mileage leasing and residual value leasing. We explain where the differences lie and what to look out for.
What is leasing residual value?
The leasing residual value describes the price that the car is still worth at the end of the leasing contract. As the car is sold on as a used car or leased on as part of a used car lease after the contract is concluded, the residual value plays a decisive role. Vehicles from well-known brands with classic equipment generally have a higher residual value and can therefore be offered at better leasing conditions than vehicles with unusual extras. Our checklist for returning the lease will help you return the company car at the end of the contract.
What is the difference between residual value and mileage leasing? Which is cheaper?
With residual value leasing, the current value of the vehicle is decisive. The contract specifies the value of the car at the end of the leasing period: the higher the estimated residual value, the lower the monthly installment. In the event of a reduction in value, i.e. if the vehicle is worth less on return than agreed when the contract was concluded, the difference must be paid. If the car has increased in value, you usually receive a percentage of the additional proceeds of around 75 percent.
In contrast, mileage leasing stipulates how many kilometers the vehicle may travel within the contract period. If more kilometers were driven at the end of the contract term, an additional payment is required. If consumption is lower, the reduced mileage will be reimbursed.
The monthly installments for a residual value lease are often cheaper, plus the unlimited mileage. However, the risk of additional costs at the end of the contract is significantly higher. This is because the residual value of a vehicle cannot usually be calculated exactly, especially for longer contract periods. Mileage leasing offers fleet managers greater security, as the price for excess mileage is contractually fixed and the costs are more predictable. However, you should calculate in advance how many kilometers you are likely to drive in order to minimize the risk of an additional payment.
The residual value of a vehicle cannot usually be calculated exactly, especially for longer contract periods.
Can I take over my vehicle at the end of the leasing contract?
If you wish to keep the car at the end of the contract, the leasing decree provides that a purchase option can be agreed between you and the lessor – provided that the basic rental period is less than or equal to the normal useful life of the leased car. However, this puts you at a tax disadvantage. This is because the leasing installments can no longer be deducted as profit-reducing expenses. You can only claim depreciation on the residual book value of the leased car.
If you want to continue using the vehicle but do not want to buy it, you can also extend the leasing contract. In this case, the contract term, leasing rate and mileage limit or estimated residual value are contractually redefined.
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Our conclusion
Leasing vehicles is a popular procurement alternative to purchasing, especially for companies. However, weigh up which type of leasing makes sense for you. If the higher residual value risk is not a problem for you, then residual value leasing impresses with lower monthly installments and unlimited mileage. The more transparent costs and a calculable risk speak in favor of mileage leasing. Anyone who needs support in the maze of leasing offers should rely on Fleethouse. The web platform gives you access to top leasing offers from renowned brands. You can manage your vehicles digitally and reduce your costs with targeted analyses.
The most important facts about residual value leasing at a glance
The monthly installments are calculated on the basis of the estimated residual value.
If the value of the vehicle on return is less than contractually agreed, you must pay. If the value is higher, you will be reimbursed 75 percent of the difference.
Although the rates are often lower than with mileage leasing, the residual value risk is significantly higher and usually unpredictable.
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