About Leasing

What is Leasing?

The term “lease” is an English word denoting charter or rent. Leasing is an alternative finance model in which use, and not ownership, of the property is crucial: the philosophy of lease originates from an idea of using an investment in a profitable manner and with a flexible payment plan.

Leasing is a tripartite relationship between:

  • the equipment manufacturer or property supplier
  • the lessee
  • the lessor (the leasing company)

 

There are two basic models of lease: finance and operating lease (Longterm lease in Montenegro). Both of these models have certain features specific to them and together they satisfy all the lessee's needs.

Advantages of lease finance:

  • enables you to manage your financial results
  • adapts the monthly financial dues to your capabilities and needs
  • advantageous in terms of insurance, discount prices and costs, which may be projected on a long run
  • short time between submitting the application and approving the finance

Dictionary

is a transaction limited in time in which the lessor finances the purchase of the property to enable its use (lease) by the lessee in consideration of the lessee undertaking to pay the agreed rent.
is a transaction limited in time in which the lessor finances the purchase of the property to enable its use (lease) by the lessee in consideration of the lessee undertaking to pay the agreed lease installments. Upon expiration of the lease agreement and subject to the lessee having fulfilled his contractual obligations, the lessee will be entitled to acquire the property.
Erste & Steiermaerkische S-Leasing d.o.o. - a company registered for dealing in leasing.
an individual or legal person entering into a lease agreement with the lessor.
is a legal or natural person assuming a joint and several obligation to the lessor to fulfill an obligation validly assumed by the lessee upon its maturity.
is the agreed amount of money deposited with the lessor during the lifetime of the longterm lease agreement as interest-free security for the due and punctual payment of all obligations of the lessee upon their respective maturities. Such amount reduces the calculation base for financing.
is such part of the aggregate rent arising under an longterm lease agreement as is paid to the lessor in advance, and which reduces the base for the calculation of rent installments.
is the amount of money paid by the lessee on the execution of the finance lease agreement, which reduces the base for calculation of the lease installments and which is not refunded to the lessee in the event of rescission/termination of the finance lease agreement.
means a movable thing, be it a vehicle, machine, ship, equipment or similar, which was chosen by the lessee to be purchased from the supplier.
corresponds to the date of execution of the lease agreement.
is a legal or natural person registered for manufacture, sale and/or service of the property.
is the period of time for which the longterm/finance lease agreement has been entered into.
is the contractual amount of money which the lessee committed to pay to the lessor in certain intervals during the lifetime of an longterm lease agreement.
is the contractual amount of money which the lessee committed to pay to the lessor in certain intervals during the lifetime of a finance lease agreement.
is the contractual value of the property at the time of expiry of the lease agreement, which is based on the anticipated value of the property at that time.
is the place of registration or domicile of the lessee, or the place in whose jurisdiction the property is registered. It may not be changed without a written approval of the lessor; however, if the property is a motor vehicle, ship or aircraft, such property may, within the scope of its normal use, depart from the place of its registration.

Longterm Lease

Longterm lease: use but not posses!

The longterm lease concept enables property to be used and replaced with the new one upon expiration of the lease agreement. The lessor is the legal and economic owner of the property .

  • the lease agreement is entered into for a period of 60 months
  • V.A.T. is payable monthly together with the rent payment
  • after the execution of the lease agreement, the lessee pays the agreed advance payment/guarantee deposit and one-off fee
  • the costs of first registration and insurance policy may be financed by the lessor and include them in the monthly rent payments
  • intended for legal and natural persons, in particular for those who are entitled to a refund of the V.A.T.
  • the lease agreement dues not provide for a redemption
  • finance with residual value is possible

Finance Lease

Finance lease enables you to become the legal owner of the property upon expiration of the lease agreement. The lessor is the legal owner of the property, while the economic owner of the property is the lessee

  • the lease agreement is entered into for a period of max. 60 months
  • the aggregate V.A.T. is payable prior to the beginning of repayment
  • the lessee accounts for and deducts the amortization and interest as operating costs
  • after the execution of the lease agreement, the lessee pays the agreed participation, the administration fee and the aggregate V.A.T.
  • intended for lessees who are entitled to regain their capital investments
  • after having paid the last lease installment the lessee becomes the owner of the property

Sale and Lease Back Concept

In this form of finance the lessee sells a long-term asset owned by him to the leasing company, whereas, immediately thereafter, the leasing company (the lessor) and the lessee enter into an agreement for lease of the property so sold.

The most frequent properties financed under sale and lease back agreements include real estate, machinery and equipment.

Sale and lease back agreements enable transformation of long-term assets into the cash in the account of the lessee.

FAQ

Not familiar with the lease so far? We encourage you to read the FAQs and the replies thereto: some of your concerns may be resolved. Should you need additional, more in-depth information, do not hesitate to contact the professionals working in an S-Leasing or Erste Bank branch office nearest to you.

Why will an invoice not be issued for the longterm lease guarantee deposit?

The guarantee deposit as such (its name being self-explanatory) constitutes a money deposit which serves as a security for the due and punctual payment of all monetary obligations of the lessee and of the return of the leasing object in ordinary/good shape. The advance payment is therefore not a down payment for the delivery of the goods or services (as treated under the V.A.T. Act); instead, it will be returned to the lessee upon expiration/return of the lease agreement. The lessee accounts for the guarantee deposit as a long-term asset.

In an longterm lease deal, what is the role of the advance payment?

The advance payment is such part of the aggregate compensation to be paid under a lease agreement, which is paid in advance. The compensation is divided during the finance period into proportional amounts and entered as a cost in the lessee's books at the maturity of each rent payment.

At what time will the payment of a rent/lease installment be considered duly made?

Under the General Terms and Conditions Applying to Operating/Finance Lease Agreements, lease installments/rent payments fall due on the first business day in each month. Payments of lease installments/rent shall be considered validly and timely made if made by the 08th (eightth) day in the current month. No default will be charged in this period.