Step 9 – Servicing the leasing contract
The obligations of servicing the leasing contract are both of the lesseeThe lessee is the user of... More and of the lessorOne of the parties to the... More, with those of the lesseeThe lessee is the user of... More being predominant.
The servicing of the leasing contract begins after the hand-over of the leasing assetThe leasing asset is the subject... More to the lesseeThe lessee is the user of... More and ends upon the expiration of the leasing contract and the fulfillment of all obligations under it. We will look into the finalization of the leasing contract itself into another article due to its specifics.
Obligations of the lesseeThe lessee is the user of... More
The leasing contract is already functional and the lesseeThe lessee is the user of... More is in possession of the leasing assetThe leasing asset is the subject... More. The “servicing of the leasing contract” begins.
- Payment of installments
The main obligations of the lesseeThe lessee is the user of... More are connected with the timely payment of the leasing installments, as they are stipulated in the Repayment Plan of the leasing contract. The installments are usually monthly and of the same amount.
The important thing here is that the obligation for payment of the lesseeThe lessee is the user of... More as well as the due dates for payment stem from the leasing contract and not from reminders for payment, invoices or other information which the lessorOne of the parties to the... More usually sends to the lesseeThe lessee is the user of... More. Or in short – the lesseeThe lessee is the user of... More is obliged to pay the leasing installment on the due date without waiting for reminders.
- Payment of insurance premiums
As we mentioned in the article “Insurance” above, the leasing contract usually envisages the obligation of the lesseeThe lessee is the user of... More to maintain an active insurance coverage of the leasing assetThe leasing asset is the subject... More. This obligation is linked with the payment of insurance premiums. The premium is paid annually, every six months or quarterly according to the insurance policy. Normally the lesseeThe lessee is the user of... More pays the premium to the lessorOne of the parties to the... More, who transfers it to the insurance companyThe insurance company is a specialized... More.
Depending on the type of the leasing assetThe leasing asset is the subject... More it is possible that the lesseeThe lessee is the user of... More will need to organize some additional activities, linked with the insurance coverage, such as inspection of the leasing assetThe leasing asset is the subject... More by representatives of the insurance companyThe insurance company is a specialized... More, installation of additional mechanisms against fire, theft, etc. The lessorOne of the parties to the... More usually reminds the lesseeThe lessee is the user of... More for the need to carry out these additional activities, by requesting documents proving that they have been done. At the same time, not without cause, we suggest that the lesseeThe lessee is the user of... More takes a more active role in ensuring of the insurance cover – after all, the lesseeThe lessee is the user of... More is responsible for all risks associated with the leasing assetThe leasing asset is the subject... More.
It is important to mention here that new obligations for payment of insurance premiumThe insurance premium is the sum... More arise in the second, third, and remaining years of the leasing term. In the initial leasing offers there is mention only of the insurance premiums due in the first year of the leasing term. The remaining ones are omitted. Very rarely there are leasing companiesA company whose main activity is... More and respective insurance companies, who offer one insurance with a tenor of a few years (the term of the leasing contract). Normally the insurance policies are annual with insurance premiums paid either annually or quarterly.
Obligations of the lessorOne of the parties to the... More
After the delivery of the leasing assetThe leasing asset is the subject... More and the registration of ownership (if the asset stipulates such), the main obligations of the lessorOne of the parties to the... More are reduced to:
- Regular invoicing on the due dates of each monthly installment,
- Control of maintenance of the necessary insurance coverage and linked with this activities,
- Administrative support to the lesseeThe lessee is the user of... More – support for service and maintenance of the leasing assetThe leasing asset is the subject... More, annual technical checks, proxy letters for driving, etc.,
- Support to the lesseeThe lessee is the user of... More for guaranty service of the leasing assetThe leasing asset is the subject... More by the vendor,
- Support to the lesseeThe lessee is the user of... More for booking and repairing damages to the leasing assetThe leasing asset is the subject... More by the insurance companyThe insurance company is a specialized... More.
Not included in the leasing contract, but still practiced by some leasing companiesA company whose main activity is... More are reminders sent to the lessees for upcoming leasing payment obligations. This is usually done by SMS or e-mails sent automatically.
In addition to the above, some leasing companiesA company whose main activity is... More have very well developed web portals, where the lesseeThe lessee is the user of... More can find not only the latest invoice but also make a historic report, check all future payments as well as receive much additional administration services.
Obligations of the insurance companyThe insurance company is a specialized... More
Often insurance under a leasing contract is considered as the “necessary evil” or as an “additional financial burden”. If the above obligations are done formally and without the proper attention, it is possible to omit the obligations of the insurance companyThe insurance company is a specialized... More. The most frequent example of this is the renewal of a car insurance for the second or third year of the leasing, without repair of the small damages to the car incurred during the year (if not done in time, the insurance companyThe insurance company is a specialized... More will refuse the repairs). Therefore we urge the lessees to make the full use of all insurance cover when needed.
The obligations of the insurance companyThe insurance company is a specialized... More are to cover all the risks of the leasing assetThe leasing asset is the subject... More, as they are described in the insurance policy. Although the maintenance in good repair of the leasing assetThe leasing asset is the subject... More is in the interest of the lessorOne of the parties to the... More (he is the owner and that is his collateral) he usually does not have information for damages, especially the small such. Therefore the active party for making use of the obligations of the insurance companyThe insurance company is a specialized... More is the lesseeThe lessee is the user of... More, who will need to file the damages with the respective insurance companyThe insurance company is a specialized... More.
It is important to mention that upon expiration of a given insurance policy, the obligations of the insurance companyThe insurance company is a specialized... More under it are terminated. Advice to the lessees: do not waste time and be quick.
Service of the leasing assetThe leasing asset is the subject... More
Under financial leasingA leasing contract, under which, the... More and net operational leasing, the maintenance of the leasing assetThe leasing asset is the subject... More is entrusted to the lesseeThe lessee is the user of... More. An example with leasing a car – the fuel, tires, lubricants, brake pads and others all become the obligation of the and the expense of the lesseeThe lessee is the user of... More. The only advice here is to take care and meet all due dates under the guaranty, which may link the maintenance of the car with the requirement to use specific auto repair shops.
The exception to the above rule is the full-service operational leasing. It is used exclusively for leasing cars. Under this type of leasing, the lessorOne of the parties to the... More undertakes the much of the obligations for maintenance of the leasing assetThe leasing asset is the subject... More and other supporting services, such as:
- Booking of claims for guaranty service;
- Administration support – annual technical check, vignette, road tax, etc;
- Insurance cover – making the insurance and the additional administration;
- Tire management – change and wardrobe;
- Lubricant management, filters, and other car-fluids;
- Changes of consumables – brake pads, disks, etc;
- Booking and repair of insurance indemnities;
- Replacement car for use by the lesseeThe lessee is the user of... More when the original leased car is being repaired;
- Fuel management;
- Other services.
In this case, the obligations of the lessorOne of the parties to the... More are considerable. The expenses for them are included in the monthly leasing installments. The lessors themselves, seldom execute these obligations on their own. It is much more common to use sub-contractors, with the leasing companyA company whose main activity is... More only coordinating the timely and efficient execution of each obligation and the expenses paid.
We need to mention that on the Bulgarian market fuel management is still not offered as an additional service by the lessorOne of the parties to the... More. Therefore we may anticipate this to occur in the coming years.
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