BBVA API Market
Businesses, from self-employed to SMEs and large companies, need financing solutions that suit their needs. Leasing is a method that can optimize the use of resources and which combines business liquidity (or lack of) with the use of assets.
Leasing is a financing method by which a financial entity (the lessor) and an individual or company (the lessee) sign a contract, which establishes that the lessor transfers an asset to the lessee over a certain period of time and in which the lessee will be required to make regular payments to use this asset.
A leasing contract always follows the same pattern and is divided into four phases.
For example, the company acquires a vehicle fleet. This is sometimes processed “upon request,” purchasing the vehicle when it is requested.
A conventional rental contract is signed between the lessor (the leasing company that owns the asset) and the lessee (the individual or company that will use the asset), including the necessary options and additional terms and conditions.
The lessee will make the monthly payments to the lessor as agreed, in terms of amount and period.
This is the phase that defines the leasing method. At the end of the contract, the lessee must choose to purchase the asset, extend the contract (although it is common to change to a different model in the case of car leasing services) or terminate the contract.
As discussed in previous articles, the main difference between leasing and renting is that leasing is a financing method that allows an asset to be offered for rental and to be purchased in the future. With leasing, the lessee (individual or company that uses the leased asset) and end up purchasing the asset; however, renting solutions do not offer this possibility.
The leasing contract will be drawn up according to the type of use of the asset being financed (industrial machinery, vehicle, property, etc.), the contract term, the purchase or return terms and conditions, and even the associated taxes.
Financial leasing is the most common method, and it tends to be used when the asset being financed has a useful life that is longer than the term of the contract. It is frequently signed with a view to the future purchase of the asset.
With this leasing method, the lessor offers the asset to the lessee, which the lessee can use, and will be asked to pay for the asset over a period of time, clearly establishing the “cost of the asset” and “interests.”
Financial leasing rarely includes maintenance or repair costs. These can be included in the contract, but the lessee is usually responsible for paying these expenses.
Operational leasing applies to assets renewed on a regular basis or with a very short useful life, such as computers or printers. This leasing method does not usually include the option to become the asset’s owner at the end of the contract.
Unlike financial leasing, in cases of operational leasing the lessor is responsible for all casts related to maintenance of the asset, with lower monthly payments, and the contract is usually terminated or the asset is replaced for a new asset to lease at the end of the contract.
Real estate leasing includes building, commercial premise or land rental and the movable and immovable property leasing option also includes machinery for long-term use, photovoltaic installations, ships, etc.
One of the most important features of these types of financial leasing is that lessees can deduct payments as an expense and repay assets as their own.
With this leasing method, there are two transactions: first, the asset owner sells it to another individual or company, who becomes the asset’s lessor, and the owner becomes the lessee (individual using the asset leased).
Leasing back is an interesting option when the asset’s first owner needs cash but also needs to use the asset. The asset will be owned by a different individual or company for a period of time.
Leasing offers a series of advantages for lessees and lessors, among which the following stand out, in no particular order of importance:
Capacity to purchase assets without the need for a high liquidity ratio. Leasing allows small enterprises to gradually build on their stock of, for example, machines, as they need them.
With regard to the previous point, leasing allows the entire asset’s value to be financed, deducting the initial cost of acquisition after the end of the leasing period.
It allows assets to be renewed as they reach the end of their useful life or become obsolete and incompatible. We often hear about digital obsolescence, but there is also legal obsolescence: for example, ICE and polluting vehicles that can no longer be used in different places.
By allowing to deduct the payments as an expense and repay the asset as one’s own (the latter is not possible in all contracts), it also improves the financial and tax management procedures for companies.
The low entry price makes it easier for companies to have greater control over their expenses by knowing the fees in advance.
Although leasing is gaining traction as an alternative, the traditional loan-based purchase continues to be the most common method among individuals to buy a vehicle. On the BBVA API_Market portal, you can find examples of APIs that facilitate vehicle financing, such as Auto Loan Calculator (Spain) and Auto Loan (Mexico). Thanks to these integrations, the sale of vehicles can be connected to different financing options.
Specific benefits of leasing or car loan processes with APIs include streamlining the request process, arrangement and management, and reducing the paperwork and improving user experience.
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