Vehicle financing can be usually arranged through a loan, part-payment or leasing. Different forms of leasing include service, finance and transfer leasing.
Compared with finance leasing, service leasing is a more flexible form of financing because finance leasing does not typically include servicing or repairs caused by regular wear and tear. In service leasing, ALD Automotive owns the leasing vehicle and bears the residual value risk.
A service leasing agreement is made for three or four years and, in most cases, it can be extended at the end of the agreement period. Vehicle financing in the form of service leasing causes no unexpected costs for your company. The leasing rent includes periodic servicing, repairs caused by regular wear and tear, seasonal tyre changes and a replacement car during servicing, depending on the agreement type.
When a company owns a vehicle, it is recognised at fixed assets on the balance sheet. When a company buys a vehicle using a loan, the financing is recognised at liabilities and interest is recognised at financial expenses. In service leasing offered by ALD Automotive, the company does not own its vehicle; it leases it, and no financing is recognised on the balance sheet. When it is time to replace a car, the customer company does not need to see to the sale of the car. In service leasing, ALD bears the risk of a decreasing resale value.