Buying a car outrightly isn’t the only way to own a car, there is also the option of obtaining a vehicle lease, which to some extent makes more financial sense than paying for a vehicle all at once, most especially if you do not have the financial capacity at the time to cover the one off payment.



So what’s a Lease? A lease is a contractual agreement between two parties, the lessor (owner or financer) and the lessee (you). The lessor grants the lessee rights to exclusively possess a specific asset, which can be a land, vehicle, equipments or household appliances, over a specific period of time and pre agreed conditions, in return for specified periodic rental or lease payments.



How Leasing a Car Works In Nigeria

Generally getting a car lease with financial institutions or car leasing companies involves this two options - An “Operating Lease” and or a “Finance Lease”. They are both almost similar but have quite a distinct difference.



With an Operating lease, you are given exclusive rights to use and possess a car over a particular period of time, the period of use is expected to be shorter than the economic life of the car, without any transfer of ownership rights of the vehicle.



During the period of the lease agreement, you are expected to make rental payments (usually monthly) for the use of the vehicle. At the end of the agreed period of use, you will be required to return the vehicle back to the lessor. If you however choose to continue utilizing the vehicle after the end of your lease period, you will be required to apply for a new Operating Lease.



With a Finance Lease, you are also given exclusive rights to use and possess a vehicle over an agreed period of time, which is dependent on your agreement with the lessor. However, the contractual terms of the lease would require that you make an advanced payment for the cost of the vehicle, which is relatively a small percentage of the cost of the asset. While the lessor takes up the larger percentage of the cost of the vehicle (the remaining cost). The agreement also features a fixed monthly payment over the agreed period of time, during this period the ownership of the vehicle will be in the name of the lessor until you complete the final rental payment before ownership of the vehicle can be transferred to you.



What this simply means is, if you wish to own a car and not just possess a car the best type of lease for you as an individual will be a Finance Lease. But for a company this is not advised, Operating lease will be the best option.