Are you planning to lease a car for your business? Then you may have come across the terms short-term lease and financial lease. They are two forms of leasing that differ significantly from each other. While the difference between short-term lease and operational lease mainly lies in the lease term, it is more complicated in this case.
What is short-term lease?
Short-term lease is a flexible form of private or, in the case of business driving, operational lease. You pay a fixed monthly amount to the leasing company and, in return, you can drive a (almost) new car, equipped with all imaginable luxuries, without having to worry about fixed costs. The monthly fee already includes the costs for insurance, road tax, roadside assistance, maintenance, and the like. You only need to take care of the fuel yourself. Short-term lease is possible from one month and can be terminated daily after that.
What is financial lease?
While short-term lease bears strong similarities to renting a car, financial lease is more akin to buying a car on installment. You also pay a fixed monthly amount, but you are the economic owner of the car. This means that you only pay the leasing company for the use of the car, but you have to take care of insurance, road tax, maintenance, and the like yourself.
The leasing company remains the legal owner of the car, which serves as collateral for the loan during the term of the lease contract. Once the term has expired and you have met your payment obligations, you become the full owner of the car.
In short: the difference
With short-term lease, it is possible to use a car for a short period without any additional costs besides the monthly fee. If the contract ends or you terminate it prematurely, you can return the car at no cost. Financial lease, on the other hand, is an investment for the long term, after which you will own the car.
