Electric vehicle leasing: what is it?
Before getting to the heart of the matter, what is an electric vehicle leasing contract?
As a reminder LLD (long-term leasing) is a financing method that has become commonplace among professionals. Over a set period - generally between 12 and 60 months - the lessee pays a monthly rental to the lessor, who then entrusts the lessee with one or more vehicles.
What is the difference between LLD, LOA and LMD?
Be careful not to confuse these 3 other financing methods:
- Leasing is based on a long-term contract. At the end of the contract, the vehicle is returned to the lessor, and the lessee has the option of renewing the contract with another vehicle.
- LOA (Location avec Option d'Achat) is another form of leasing where the lessee rents the vehicle for a given period, then at the end of the contract the lessee becomes the owner of the electric vehicle.
- The LMD (Location Moyenne Durée)This is a leasing arrangement lasting from 1 to 24 months, enabling the lessee to rent an electric vehicle for a short period. At the end of the contract, you'll have to opt for a long-term lease. This can be interesting if you want to test an electric vehicle before deciding to buy.
Here is a comparative table to help you better understand these three financing methods:
| LMD | LLD | LOA | |
|---|---|---|---|
|
Rental period |
Short period between 1 and 24 months |
Long-term between 12 and 60 months |
Long period between 48 and 27 months |
|
Input |
No |
No |
Yes |
|
Is it possible to buy back the vehicle at the end of the contract? |
No |
No |
Yes |
|
Insurance coverage? |
Yes |
At the tenant's expense |
At the tenant's expense |
|
Maintenance taken care of? |
Yes |
Yes |
At the lotaire's expense |
|
Assistance taken care of? |
Yes |
Yes |
At the tenant's expense |
|
Kilometric cap |
Yes |
Yes |
Yes |
Find out more : what leasing offer for a start-up company?
Why lease an electric vehicle?
At a time when the European Union has definitively banned the production and sale of new combustion-powered cars and vans by 2035, the French government is calling for all businesses to switch to electric mobility, via the law LOM LAW.
Of course, the purchase of an electric vehicle represents a fairly substantial investment, but there are alternatives, notably through leasing.
Here are just a few of the advantages of long-term leasing:
Electric car leasing: benefit in kind
In fact, when you opt for leasing, your cash flow is preserved through the company's benefit in kind.
As a reminder, as the use of electric vehicles contributes to the energy transition, the legislation has introduced an additional allowance since January 1, 2020. This is intended to further encourage companies wishing to offer company vehicles to their employees. An advantage available thanks to benefit in kind.
While this was due to end on December 31, 2022the end date for the benefit in kind for electric vehicles has been pushed back to December 31, 2024. With this extension, conditions have been added:
If the terminal is installed at the workplace :
- The terminal is used by the employee for non-business purposes and the benefit in kind will be €0,
If the terminal is installed outside the workplace :
- The employer more or less covers the cost of purchasing and installing the terminals. In this case, two further conditions apply:
- If the employee's employment contract endsthe charging station will no longer be accessible to the beneficiary. In this case, the charge is excluded from the basis for social security contributions,
- If the terminal is installed on the employee's premises and not removed at the end of the employment contractIf the terminal is installed on the employee's premises and not removed at the end of the employment contract, the cost is also excluded from the basis for social security contributions, up to a limit of up to 50% of actual expenditure, i.e. a maximum of €1,000,
- The employer is more or less responsible for the other costs of using or renting the terminal installed outside the workplace. installed outside the workplace. In this case, the cost will not be taken into account when calculating social security contributions. In addition, this will be up to limit of 50% of the actual expenses that should have been borne by the employee.
Further information : provision of an electric vehicle charging station
In addition to offering company cars to your employeesyou can also recharge cards. They will then be able to recharge their vehicles at over 300,000 public charging stations throughout Europe.
Converting your fleet to electric vehicles under long-term leasing
As we mentioned earlier, the LOM law was established to enable companies to make their energy transition. This process takes place over several periods, with a minimum proportion as stipulated in article 26A of the LOM law:
- January 1, 2022: renewal of 10% of the vehicle fleet
- January 1, 2024: renewal of 20% of the vehicle fleet
- January 1, 2027: renewal of 40% of the vehicle fleet
- January 1, 2030: renewal of 70% of the vehicle fleet
When you opt for electric vehicles (cars and/or electric vans), you'll be able to change vehicles on a regular basis.
As your company is likely to evolve over time, it is important to have vehicles at your disposal:
- Functional,
- That meet the current and future needs of your company and your employees,
- Equipped with the latest technology, especially around the car'sautonomy - an important factor if you're going to be making long journeys.
Find out more : Company - the benefits of an electric vehicle fleet
Preserved debt capacity
When you choose to finance your electric vehicle with a long-term leasing contract, you avoid tying up borrowed or own capital, and retain its financial capacity for other projects linked to your core business. As a result, the lease payments are expensed as incurred, subject to a tax write-back corresponding to the share of non-deductible depreciation charged by the lessor.
Unlike a loan, leasing does not affect your balance sheet. In this case, the lease payments will not be treated as an investment, but as a deductible expense.
How to optimize cash preservation?
With these objectives in mind, a number of complementary actions can be taken to optimize cash flow and achieve even greater savings:
Optimize the TCO of your vehicle fleet
One way to preserve your company's cash flow is to optimize the TCO (Total Cost of Ownership).
Since your business is bound to evolve, it's important to be flexible and adjust to changes both inside and outside your company, for example:
- Regulatory and legislative frameworks,
- Technological developments,
- New business needs.
Being able to manage TCO will enable you to study several elements in depth, including :
- Estimated actual costs of the park,
- ROI (Return on Investment) evaluation,
- The right time to renew the vehicles in your fleet,
- Vehicle choice and selection, motorization, energy consumption.
Thanks to this reference indicator, the manager will be able to identify expenditure items that need to be optimized, and thus improve cost control.
To optimize your fleet's TCO, you can start by focusing on :
- Choice of vehicle
- Costs associated with vehicle maintenance (oil changes, tire replacements, car washes, etc.).
- Train your employees in the use of electric vehicles: your employees also play a part in optimizing TCO, by offering them training in the use of electric vehicles. This training will enable them to adopt best practices, such as :
- Eco-driving
- The use of regenerative brake
- Check tires, lights and windshield wipers
- Anticipate slow-downs to avoid excessive braking
Remember: TCO (Total Cost of Ownership) covers all the costs associated with owning a vehicle, from the moment it is purchased to the moment it is sold or destroyed.
Monitor energy consumption
As a first step, you can monitor the energy consumption of your electric vehicle, to avoid additional energy costs and save money in the face of rising electricity prices. savings in the face of rising electricity prices since February 1, 2023.
A number of practices are possible, such as :
- Choosing a fuel-efficient electric vehicle
- Favour smooth driving
- Use the "eco" mode to reduce the energy consumed by the vehicle and save the battery.
For more information: 8 tips to reduce the energy consumption of your electric car
Electric cars: national and local aid
Did you know that there are grants available for purchasing and leasing electric vehicles?
In fact, to encourage private individuals and professionals to adopt electric mobility, a number of government subsidies are still available, such as :
- For legal entities, the ecological bonus is set at 27% of the purchase price, including VAT, up to a maximum of €3,000, for the acquisition of an electric passenger car,
- For the purchase of an electric van, assistance is set at 40% of the acquisition cost, with a ceiling of €4,000 if the van is purchased or leased by a legal entity,
- For used used electric vehiclesassistance is set at €1,000.
- Conversion bonus : when a polluting vehicle (diesel or gasoline) is scrapped, the French government pays the motorist a bonus enabling him or her to buy or lease a low-pollution vehicle. To be eligible, your company must be based in France.
The company's bonus is capped at 2 500 €.
- Zero interest loan (PTZ) From January 1, 2023 and for a period of 2 years, the zero-rate loan for the purchase of a low-polluting vehicle is launched for an experimental period. Several conditions must be met to benefit from this scheme, set at €30,000, namely:
- Be an SME or VSE with fewer than 10 employees
- Be located in a ZFE-m (Low Emission Mobility Zone) or in an adjoining intercommunal area
- Have sales of up to 2 million euros
- Acquire an electric vehicle for a maximum amount of 45,000 maximum for a car, 60,000 € for a vanwith a total laden weight of 2.6 tonnes and CO2 emissions below 50 grams per kilometer.
Good to know In the case of a LLD or LOAthe PTZ (zero-rate loan) is also eligible, up to a maximum of €10,000. The loan repayment period corresponds to the lease contract.
- ADEME green loan : This scheme, offered by BPI Francewill help small and medium-sized businesses finance their energy and ecological transition projects. Over a period of 2 to 10 years (with a 2-year capital grace period), the organization undertakes to pay the company between €10,000 and €1,000,000 to the company.
- Electrical retrofit aids : introduced in April 2020, it is possible to electrify a combustion-powered vehicle by removing the engine and fuel tank and replacing them with a battery and electric motor: this is known as retrofitting. The amount depends on the vehicle category:
- For a car: a bonus of €2,500,
- For a van (depending on its weight): a bonus of up to €9,000.
For further information:
LLD: avoid additional expenses
As long-term leasing is a financing method in which the rent remains unchanged for the duration of the contract, it gives you greater control over your cash flow.
What's more, leasing an electric car saves you extra expenses, such as :
- Vehicle resale costs by calculating depreciation
- Indemnity reimbursement
- Cash advances for repairs
- Purchase of a new electric vehicle
- Taxe sur les Véhicules de Société (TVS): electric vehicles emitting less than 60g of CO2 (WLTP standard) are not subject to this tax.
In this way, the electric vehicle leasing company takes full responsibility for the above-mentioned points. This is a great relief for your cash flow.
Bonus: save on fuel
In fact, by opting for a leased electric car, fuel costs are lower than for their combustion counterparts. At present, fuel costs for internal combustion vehicles vary between €1.60 and €2 per liter.
On the other hand, it's true that electricity costs have recently risen, but you have the option of charging your vehicle at off-peak times, when electricity use is less frequent.
At these times, electricity costs are lower. In fact, this practice is one of the many ways of coping with rising rising electricity costs.
Also read: 10 myths about electric cars debunked
Conclusion
One of the reasons why long-term leasing is so popular with businesses is that it can be adapted to the company's situation, i.e., electric vehicle offers are tailored to the project, budget and needs of the business.
One of the advantages of long-term leasing is that it preserves cash flow and gives you greater control over financial management.
In fact, if you're looking to renew your vehicle fleet, think :
- National and local aid
- Adapt and train your employees to use electric vehicles in an environmentally friendly manner
- Keep a close eye on your company's TCO, so you can make the right decisions as your business evolves and needs change.
For more information, we've put together a guide to this topic to explore the different aspects in depth:
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