Many companies in Germany who provide their employees with company cars do not actually buy the cars outright, instead they prefer to lease them and my company car is no exception.
By leasing the car, I pay a monthly fee to a leasing company, often a bank, who have purchased the vehicle from my usual dealer. That fee allows me to drive the car up to an agreed number of kilometres each year.
And when the lease runs out, I just return the car to the dealer and can lease a new one.
Buy why not buy the car outright as a business and then sell it again later?
Well, for a start I do not have to put down a lump sum at the beginning or end of the lease, as I would do with a normal purchase by instalments – as long as I give the car back in a reasonable condition!
If I did purchase the car by instalments, the car would be considered part of the company assets and I could even offset the VAT for the entire price in the first month (or so I’m told), meaning that I would have a massive VAT rebate. The trouble is, that when I sold the car I would have to pay a portion of this back again, so I would need to put it on a company savings account somewhere.
As it is, my monthly leasing rate is taken into account each month for tax purposes and at the end of the lease I either get a refund if I have driven less kilometres than agreed, or I have to pay a surcharge if I have used more.
But a very good reason for not selling a company car to a consumer is that as a business seller you have to offer a one year warranty on it. Or put another way, if something goes wrong with the car within 12 months of selling it, it’s the business’ responsibility to get it fixed or at worst even take the car back again and refund purchase price.
This really is a hassle that you don’t need as a small business, and since it’s a lot easier to budget for the monthly leasing rate than risks like that, it’s easy to see why many businesses use this method of providing cars for their employees.
For anyone staying in Germany for a fixed length of time, eg. 2 years, then leasing can also be a good option, because you can just hand the car back at the end of that time and leave the country – again without the problem of selling or exporting the car.
About Graham
i mostly prefer to purchase a car on lease
rather than buying them,for some very good reasons.
Thank you for the post! My husband and I are looking into leasing a car, because we don’t intend to stay in Germany for longer than 2-3 years.
Question:
1) In case you leave the country earlier than the lease expiration is there a fee? (for example the lease was for 2 years, but we left after 1 year)
2) What if you drive more km than in the contract?
3) Do you need a local driver’s licence? or you can lease with your own and then get the local one?
Thank you in advance!
Hello Fatima, I’ll try and answer your questions as best I can.
1) You book the car for a certain length of time, so if you want to return early it may mean handing the car back and just continuing to pay the lease each month until it expires. It is worth asking the dealer what can be done, because obviously the car is still worth more and has less kilometres on it, so perhaps you can pay less each month and just not get the rebate on the kilometres at the end.
2) If you drive more km than in the contract, you pay for those per km. Some contracts have a grace amount written into them, which works both ways. So you be able to go over a little without paying more but if you are under by not much you won’t get anything back either. This is really down the contract. If the insurance is tied to the same amount of km then that is more critical, because you could be uninsured the moment you go over the amount and whilst the lease contract tends to just be interested in the entire amount of km over the lease period, insurance is on a per year basis.
3) No, theoretically you may not even need a license at all if you are leasing for someone else, (eg. if you are self-employed and your employee is going to drive the car), but obviously the driver must have a license that is valid and recognised in Germany. If you are coming from outside the EU, you will need to find out how long you can drive on the overseas license before it needs to be exchanged for a local one.
Dear Graham,
I work for an intergovernmental organization in Munich, Germany. I am likely to remain here for at least the next 3 years. I am considering getting a lease car. Based on your experience what is the best leasing firm in Germany for private leases?
Thanks!
Simon
I lease my cars directly from the dealer, although all the finance part is ultimately done via a company that they pass the contract on to. So the easiest thing to do is to decide which brand of car you want to lease and to go to one of their authorised dealers and ask them if that service is available for private clients.