Lease with Option of Purchase (LOA) and Long Term Rental (LLD) are now acclaimed by the French when buying a new vehicle, with 70% of the financing market after bank. What are the differences between the two formulas and why is the LOA so successful? What place for classic auto credit?
LOA and LLD: what difference?
Rental with purchase option is today the number one solution used by the French to finance the purchase of a new car. In January, 500 million euros were borrowed LOA in France according to the Association of financial companies, against 174M € for the classic car loan. This mode of credit even wins the financing of used vehicles (+ 38% in 2018). LOA and LLD have the same basic operation: the user pays a monthly rent corresponding to the use of the vehicle. Some formulas may also include vehicle maintenance and assistance.
The difference is at the end of the rental period: with a LOA you can buy the vehicle at a fixed price at the start , while in LLD the vehicle is systematically returned to the concession. This difference certainly explains the success of the LOA because the French remain attached to the possibility of buying his vehicle.
The LOA acclaimed
The reasons for such success are both in tighter budgets for households but also in another way of apprehending the property. The younger generations are now more open to renting, sharing rather than owning. That’s why the LOA has taken over funding in just a few years . However, when doing the calculations, the LLD is more interesting and less expensive to use. Less regulated also because it is not considered a consumer credit and therefore less restrictive in terms of communication for car manufacturers.
Auto credit: a classic that continues to appeal to households
Classic auto loans, however, withstand purchases of smaller amounts or purchases of used vehicles. A car loan can finance all or part of the purchase of a new or used vehicle, where it weighs nearly ten times more than the LOA (324 million euros borrowed in January). A personal contribution is not mandatory but, unlike a personal loan, the amount borrowed must be used to finance the purchase of the vehicle. The rate practiced depends of course on the amount borrowed and the duration of the loan. For example, for a car loan of € 9000 over 48 months, the rate is 3%, which represents a monthly payment of about € 200.