Long-Term Rental
Long-term car rental is a popular term, in fact referring to operating lease of vehicles with additional services for car servicing. It is offered in 2 variants - full service and administrative support of the fleet (it is Full Service Leasing) and partial service (Leasing with the Service).
Familiarize yourself with the generally applicable on the market, detailed definitions of long-term rental, created by PVRLA.
Full Serwis Leasing (abbreviation: FSL)
- Financing the client's fleet under an operating lease, rental or lease contract.
- Residual value (RV) risk on the financing party’s side.
- Duration of the contract: at least 24 months.
- It must include at least 3 non-financial services (always including mechanical service).
Leasing & Service (abbreviation: LS)
- Financing the client’s fleet under an operating lease, rental, lease or financial lease contract.
- Residual value (RV) risk on the financing party’s side.
- Duration of the contract: at least 24 months.
- It must include at least 2 services (always including mechanical service).
Explanations for definitions - additional concepts
The residual value, that is the final value
(RV)
This is the assumed market value of the vehicle at the time of resale, after the end of the agreed period of use, i.e. after the termination of the long-term rental agreement. The residual value decreases with the age of the car, and its amount depends on several factors - the make and model, engine capacity, mileage and history of the vehicle and (in the smallest degree) equipment. A simple rule applies here - the higher (and more expensive) car model, the greater the percentage of values lost during the months and years of operation. This usually means a loss of 25% to 40% of the vehicle's value after the first year of use, i.e. the residual value is from 75% to 60%, respectively. For an entrepreneur using tens or hundreds of vehicles, this value translates into measurable benefits or losses. Therefore, we should entrust its proper calculation to specialized long-term rental companies that take the risk of residual value, i.e. the difference between the purchase price and the final value of the fleet.
Non-financial services as part of long-term rental
Most clients of companies offering fleet services use vehicles using a comprehensive service package. In addition to financing, it also includes servicing and fleet management in all areas – operational, administrative, legal and technical.
The main non-financial services include:
- Insurance
- Loss adjustment
- Maintenance
- Replacement and service of tires
- Assistance and replacement cars
- Fuel card services
- Door-to-door
- Reporting
In addition to long-term rental, the market also offers so-called traditional financial lease of cars, which relies exclusively on the external financing of the entrepreneur's cars, without their service or administrative support.
Traditional financial lease (only financing – no service)
- The leasing company finances the cars under an operating lease, rental, lease or financial lease contract.
- Residual value (RV) risk on the financing party’s or user’s side.
- Duration of the contract: at least 24 months.
- Without non-financial services or with 1 service.