LEASING

A MODERN FINANCING ALTERNATIVE

Lecture No. 7
TOB

CONTENTS
Leasing conceptual approaches

The leasing market in Romania

Leasing versus banking credit

Leasing defined
Method of payment for the use of an asset
Different from renting
A party undertakes to transfer for a
determined period of time to another party
the right to use an asset against a regular
payment
The right of option

Leasing conceptual approaches

Definition:

Parties:
lessor/the financer (locator/finantator/Leasing-Geber)
lessee/the user (locatar/utilizator/Leasing-Nehmer)
supplier (furnizor/Hersteller)
insurance company (companie de asigurari)

Mechanism of leasing
1. A leasing contract is signed between the Lessor and the
Lessee
2. The Lessor pays the purchase price to the Supplier
3. The equipment is delivered to the Lessee
4. The Lessee pays lease rentals determined by contract to
the Lessor.

Types of lease operations

short term leasing

medium term
long term
direct
indirect
lease-back (sale and lease-back)
buy-back
personnel leasing
experimental
time-sharing

international (external) leasing

internal leasing

LEASING terms

Economic life :
the period along which a certain good is estimated to be economically usable by one
or more users; or
the number of the production units or similar units that are estimated to be obtained
through using the good by one or more users.

leasing rate / royalty :

in case of financial leasing: the due quota of the entry value of the good and of the
leasing interest (the average rate of the bank interest on the Romanian market);

in case of operational leasing the quota for amortization calculated according to

the normative acts in force and a benefit established by the contracting parties
entry value (valoare de intrare)
-is the value at which the good was acquired by the financing party, the cost of acquisition
respectively.
residual value (valoare rezidual)
the value at which, at the expiry date of the leasing contract, the transfer of the right of
property over a good by the user is done.
total value (valoare total)
- the total value of the leasing rates to which the residual value is added.

Advantages of leasing

financial statements are not "loaded" with expenses

(just the monthly royalty)
- credibility
- future financing contracts
ease of scheduling the expenses
easy replacement of depreciated goods
no need for supplementary guarantee
rapidity of the approval of the operation process

Disadvantages
For the lessee

Equipment is not operational under the whole

period of the contract
The cost of the leasing
The ownership of the good

For the lessor

goods can be damaged after the first lease
royality delayed

Comparing leasing and credit

Leasing

Credit

Ensures the investments financing

Ensures the investments financing

No other collateral requested

Supplementary collateral

Financial statements do not include

liabilities to banks

Financial statements include liabilities

to banks

Duty fees are paid at the residual

value

Duty fees are paid at the entire value

of the good

Advance required

Advance payment

Leasing market in Romania - short

history

1994 the first Romanian leasing company

1996 ASLR (Association of leasing companies in Romania)
two conditions imposed by law
-object of the activity leasing
-registered and paid capital of EUR 500,000
331 companies, 213 sent documents to the BNR to be registered as
IFN (after new regulations Norm 28/2006)
100 active , 33 members of ASRL (48% of the market) 38 in 2005

News of Legal Framework

OUG 50/2010 ref. protectia consumatorului/ Gov.Ord. no.50/2010 regarding the CC agreements:
Aplicarea retroactiva / retroactive application:
Extra-costuri ale finantatorilor si ale clientilor / Extra-costs for credit institutions and
consumers
Nerespectarea Constitutiei/textului Directivei si a principiilor dreptului comercial/ No
respect for Constitution, EU Directive and commercial principles
Incurajarea abuzurilor si a unui comportament nesanatos de plata/ Encouraging abuse and
an unhealthy payment behavior
Confera puteri abuzive unei agentii guvernamentale in aria de decizie legala a BNR/ Gives
abusive power to a Governmental agency on Central Banks legal framework
Codul Fiscal/ Fiscal Code
Cresterea costurilor de finantare a achizitiei prin aplicarea TVA marit / Higher financing costs
due to an increased VAT

Scaderea capacitatii de plata prin cresterea TVA/ Lower payment capacity due to an
increased taxation

News of Legal Framework

Constitutional Court Decision no. 458/2009

regarding the consent for the forced execution
Increased

number of contracts waiting for consent of

forced execution (9000 files)
Higher provision costs
Increased operational costs for the lenders
Encouraging fraud and an unhealthy payment
behavior

Leasing versus bank credit

comparison between the acquisition of a good through

leasing and through bank credit

object: Dacia Logan Laureate

price: 6,785.73 Euro (without VAT)

institutions: BCR (Banca Comercial Romn) and

BCR Leasing

Comparison tables: leasing versus credit

Period of the leasing contract
months

48

Period of the credit contract

months

48

Currency

Euro

Currency

Euro

Price (no VAT)

6,785.73

Price (no VAT)

6,785.73

Advance (15-50% of the price

no VAT ) -20%

1,357.15

Advance- 25% of the total value

of the car

2,041

Financed value

5,428.58

Bank loan (75%* total value)

6,123

Interest rate

10.50 %

Interest rate

12%

Residual value

139.02

Residual value

Leasing installment (no VAT)

138.99

Credit installment

161

Management commission

135.71

Management commission

169.62

Value of the contract

8,164.41

Value of the contract

Total cost

9,479.49

Total cost

7 668
9,878.62

Thank you for

your attention!