| POINTS OF
COMPARISON |
PURCHASE
|
LEASING
|
| Payment
|
Full Payment. Capital
outlay results in loss of opportunity cost. (By Cash) |
Fixed monthly payments.
Does not tie up a company’s capital which can be used on the core
business or other investment opportunities |
| Loss on interest gained
from Capital invested in the bank |
Capital open to other
investment opportunities. |
|
Involvement |
High involvement; stuck
with the same vehicle model or loss on depreciation re-selling the
vehicle. |
Low involvement. A hirer
(company) can obtain tax relief from leased vehicles under employees’
benefits. |
| If there is a turnover of
staff, need to dispose the vehicle or buy another new car for new staff.
|
Terminate the lease and
simply return the leased vehicle. The lease period may be tailored to
suit various horizons. |
| Cash Flow Control
|
High involvement and
inflexible. |
Good control as cash can be
utilized elsewhere, debt is also reduced for accounting purpose as lease
payment is just overheads. Hirer can focus on core business. |
| Deductible in case
of accident/Insurance |
Pay high excess to
insurance company both for own damage and third party damage. |
CDW covered with lease,
waives the excess in case of collision damage. |
| Maintenance,
Servicing, replacement Car, Insurance, Road tax/License fee,
Administration Cost |
At own cost. Servicing and
maintenance costs are variable and uncontrollable. Car owner is at the
mercy of independent motor garages resulting in repeated visits for
repairs and maintenance. Although the manufacturer provides a free
labour car check for 1-2 times (depending on models), the consumables
replacement cost for each car check will still cost HK$400-1000 each
time the car undergoes servicing (depending on models & condition of
vehicle) |
Included in the lease rate
with no hidden cost. Full comprehensive insurance included in the lease
rate and all insurance follow-up matters, administration, costs and
management of the vehicle covered by the Lease. |
| Car allowance
|
No corporate tax relief;
asset on Balance sheet. |
The vehicle removed from
the Balance Sheet. Corporate tax relief against the vehicle lease. |
