Methods of financing business-use vehicles

Compare different methods of financing business-use vehicles.

	Own purchase	Financial leasing	Operating leasing
Vehicle is shown in business records of	buyer	lessee	lessor
Depreciation	is accounted according to the prescribed rate	is accounted according to the prescribed rate	is not accounted
Cost of rental represents	-	-	operational expenditure of the company
Period of rental	-	usually covers the major period of vehicle usefulness	arbitrary – usually shorter than the period of vehicle usefulness
Maintenance, repairs and insurance are covered by	buyer	lessee	lessor or lessee – defined by the lease contract
Risks related to ownership (loss, defects, obsoleteness, size of remaining value) are incurred by	buyer	lessee	lessor
VAT is accounted and paid	upon vehicle purchase	at the beginning of lease relationship, monthly instalments are not charged with VAT	in the amount of monthly rent
Non-deductible expenditures	costs of vehicle use, representing the use for private purposes	costs of vehicle use, representing the use for private purposes	all costs of vehicle use (unless in case of cargo vehicles)
Ownership right at the end of lease relationship	buyer becomes the owner upon purchase	is transferred to lessee	is not transferred to lessee
Termination of lease contract	-	upon early termination, lessee pays the current value of instalments still unpaid	upon early termination, lessee pays penalty in accordance with the lease contract