Ed. note: I published this a little over a year ago as a journalist-blogger post in the Tribune de Genève but with their move to a new web site last April older posts are no longer available. The information is hard for English speakers to find, and I’ve been asked to publish it again.

Photo, Julie Schindler. Of course, not all cars can be leased, such as the antique ones on display in Morges at the British Classic Car Show.

The practical life: how to lease a car

My neighbour, who repairs bathtubs for a living, drives shiny new Porsches and Mercedes. I always assumed that he must be very successful in his business. I hate to think what he’s thought of my business, based on our family’s recently discarded old clunker. Fortunately, most of my work is done online rather than in person so I rarely have to impress customers with my car.

When the old family Fiat died I decided the time had come for my company to get a car. I would drive it some of the time for personal use. Two accountants have told me since 2002 when I created Zidao Communication, a small online publishing business, that I should lease a car instead of owning one, then calculating my travel and billing the company for it as a personal expense. Two good reasons for this are that car payments are tax deductible and companies are not obliged to pay a deposit, freeing up capital. Maintenance and kilometres are tax deductible.

Their explanations made sense but old habits die hard. My father drove
thousands of miles a year for his job and he bought a new car, cash,
every two years. He billed the company for expenses. My father was the
rare soul in the United States who was audited by the IRS and ended up
with a refund and a letter congratulating him on keeping excellent tax
records. He studied every angle in the daunting US tax system, so I
always believed that if he bought a car this way he knew what he was
doing.

I almost bought a car for the family when the old one died. But this is
Switzerland in the 21st century. After doing some research it was clear
that this made little financial sense. I learned that more than half of
all new cars “sold” in Switzerland are covered by leasing contracts. I
ended up leasing a five-year-old Volvo for the company.

Here’s what this small-business owner learned about wheels for work in Switzerland:

Rules covering corporate leasing were made more flexible in recent
years. If your company is registered as an s.à.r.l. or SA you don’t
need to make a deposit. If your small company is not registered you can
still have a corporate lease but a deposit will be requested, as for
individuals. You can lease for six months or pretty much as long as you
like, depending on the age of the car. You can lease a new car or a
used one, although at a certain point in the age of the car it doesn’t
make financial sense to lease it.

The monthly payments on a five-year-old car are about half those of a
new car. Although you don’t have to pay a deposit you can make a down
payment that reduces the size of your monthly payments. I’m anxious to
keep overhead low, so a used Volvo seemed just right.

Your first step, if you’re leasing a car, should be to check out the Touring Club Suisse
site if you read French. They suggest pitfalls to watch out for, and
they offer two very useful bits of advice for people leasing privately.
Put your deposit in a blocked account, similar to those used for
apartment rentals. Any bank will set this up for you. TCS suggests you
have the residual value of the car included in the contract to avoid
disputes at the end of the lease period.

Another good source, but also aimed at individuals is Bon à Savoir (also in French), the consumer group’s site, where you can calculate what a lease will cost you.

The two sites are useful background for small business owners, but
sometimes the best starting point, especially for individuals, is your
bank. Credit Suisse has an online FAQ
(Fre) that is worth reading. I leased through a garage, but see what
financing terms the bank will offer you and you have a starting point
for negotiations.

The fine print says I won’t get off as cheaply as I would like, of
course. If you lease a car you have three obligations. Your payments
must arrive on time or the car will be seized. You must service and
repair it. You must, since you don’t own the car, have “casco complèt”
insurance. Our insurance company, Zurich, was quick to tell me how much
this would cost when I faxed them a copy of the car’s details before
signing the contract. Credit Suisse’s web site allows you to do the
same with Winterthur. If we owned the car we might decide we didn’t
need complete coverage in another two years, when the value goes down.
With a car leased for three years I don’t have that option.

Paying off the car: in the past you
were penalized if you paid up before the contract ended, but this has
changed. If I have a windfall next year I could pay off the leasing
difference and buy the car without an interest penalty. Zidao would
then, however, own the car, which gives the company a taxable item. We
might not want to increase our taxable fortune.

As always with a used car, you fear buying a lemon. More than 700,000
used cars are sold every year in Switzerland and the TCS gives good
advice about finding the car that will make you happy.

What they don’t tell you is that leasing might change your
relationships with others. Since last week I have become intolerant of
potato chip crumbs in my car. I carry a rag around to wipe off bird
droppings. After all, the car doesn’t belong to me.

It’s the best excuse I’ve had in years for car tidiness.

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