Long-term car rental in comparison: Which model suits your fleet?

1. long-term rental

With long-term rental, you use a vehicle for a defined period at a fixed monthly rate. Depending on the provider and service description, services such as insurance, maintenance and tire changes are included in the rate. At MHC Mobility, long-term rental is offered as a car subscription with two models: FlexiRent for immediately available existing vehicles and SelectRent for individually configurable new cars.

2. leasing

Leasing is a financing-related model with a contractually fixed term and mileage. The vehicle is used over the term and returned at the end. Services such as maintenance and insurance are generally not included in leasing and must be organized and paid for separately. The terms usually start from 24 months.

3. vehicle purchase

Upon purchase, the vehicle becomes the property of the company. It appears on the balance sheet as a fixed asset and is depreciated over its useful life. The company bears all ongoing costs for insurance, maintenance and repairs separately and assumes the full residual value risk on resale.

4. short-term rental (classic car rental)

Short-term rental is tariff-based and designed for days, weeks or a few months. It is suitable for very short-term requirements, but is significantly more expensive over longer periods than long-term rental. Services are limited and customization is generally not possible.

The following table compares the four models based on the most important decision criteria.

The long-term rental refers to the MHC Mobility model with integrated services.

For many fleet managers, the key question is: should I continue leasing or is it worth switching to long-term rental? Both models have things in common: fixed terms, monthly installments and no ownership. However, there are significant differences in practice.

Cost structure

With leasing, you pay a monthly leasing rate that only covers the use of the vehicle. Insurance, maintenance, tire changes and UVV inspections are added as separate cost items. These costs are difficult to calculate in advance as they depend on wear and tear, damage history and market prices.

With long-term rental from MHC Mobility, all these services are included in a fixed monthly rate. This means that the rate corresponds to the actual total costs per vehicle. This transparency is a decisive advantage for fleet managers who have to plan budgets and manage cost centers.

Flexibility and terms

Leasing contracts are usually fixed for 24 to 48 months. Premature termination is either not possible or is associated with high redemption fees. This can become a problem if the company’s vehicle requirements change faster than the contract allows.

Long-term rental offers two options here: SelectRent offers long-term terms from 24 months, with the option to continue driving at the same conditions after the end of the contract and cancel on a daily basis. In addition, FlexiRent offers vehicles for short-term requirements from one month. Both models can be combined in the same fleet without having to change service provider.

Return and residual value risk

At the end of a leasing contract, the question of the vehicle’s condition often arises. Compensation for reduced value, return protocol and additional payments for excessive wear and tear are typical points of contention. With residual value leasing, the company also bears the risk that the actual vehicle value is lower than the calculated residual value.

There is no residual value risk with long-term rental from MHC Mobility. The vehicle is returned on the basis of a transparent damage catalog with external appraisal. There are no additional payments for normal wear and tear.

Administrative expenses

With leasing, companies have to organize insurance, maintenance, tire changes and general inspections themselves or outsource them to third-party providers. This means: several contracts, several contact persons, higher coordination costs.

With long-term rental via MHC Mobility, the entire process is in one hand. A personal advisor coordinates maintenance appointments, organizes replacement vehicles and takes care of claims processing. This is a noticeable relief for fleet managers who do not want to manage five different service providers.

Summary: Long-term rental vs. leasing in comparison

Leasing is suitable if the focus is on financing and procurement and the company wants to organize maintenance, insurance and tires itself or already has a well-established process for this. Long-term rental is suitable if predictability, service integration, rapid scaling or desired configuration are important and the company wants to hand over the day-to-day running of the fleet to a service provider as completely as possible.

For a long time, vehicle purchase was the standard model for company cars. However, the situation has changed for many companies: Capital needs to remain flexible, technologies change more quickly and the administrative burden of running your own fleet is considerable.

Capital commitment and balance sheet effect

When purchased, the vehicle is recognized as a fixed asset on the balance sheet and is depreciated over its useful life. This ties up capital and affects balance sheet ratios. This can be a disadvantage for companies that want to optimize their equity ratio or keep credit lines free.

The long-term rental appears as an operating expense in the income statement. There is no investment item, no depreciation and no capital commitment. The monthly installment is fully tax-deductible.

Loss of value and technology risk

Anyone who buys a vehicle bears the full loss in value. The residual value of combustion engines is relatively easy to predict. With electric vehicles, however, whose technology develops in short cycles, the residual value risk is higher and more difficult to calculate.

Long-term rental eliminates this risk. You return the vehicle at the end of the term and can switch to a newer model. In this way, you always remain technologically up to date without having to realize losses when reselling.

Running costs and administration

When purchasing, all running costs must be organized separately: Insurance, maintenance, tires, general inspection, UVV inspection, claims settlement. For a fleet with ten or more vehicles, this means a considerable administrative effort.

All these services are integrated into the long-term rental. MHC Mobility reminds you of service appointments, organizes workshop work, provides replacement vehicles and handles claims. The fleet manager is relieved of operational tasks and can concentrate on strategic issues.

Summary: Long-term rental vs. purchase in comparison

Purchasing is suitable if the company uses vehicles permanently for many years, the fleet is hardly changed and the internal organization for maintenance, insurance and administration is already in place. Long-term rental is suitable if capital is to remain flexible, the fleet changes regularly and the operational expenditure for administration and service is to be reduced.

If you only need a vehicle for a few days, you are in good hands with a classic car rental company. However, as soon as the need extends beyond four to six weeks, short-term rental quickly becomes uneconomical.

The reasons are obvious:

• Daily and weekly rates add up over months to a multiple of the monthly long-term rental rate
• Maintenance and tire changes are generally not included in a short-term rental
• Individual vehicle configuration, lettering or installations are not possible
• No fixed contact person, no consistent service over the rental period
• Insurance cover is often limited to basic cover, additional options cost extra

For companies that repeatedly resort to short-term rentals to cover short-term needs, long-term rental via FlexiRent is the more economical alternative. The minimum term starts from one month and the rate includes all services. This way you avoid the cost trap of repeated short-term rental contracts.

In everyday fleet operations, MHC Mobility repeatedly observes similar decision-making patterns that cost companies unnecessary money or flexibility. Three of the most common mistakes:

Tying up too early for too long: A company leases 20 vehicles for 48 months. After two years, the business strategy changes and five employees leave the company. The vehicles stand around unused, the leasing installments continue. A mixture of long-term lease (SelectRent) and short-term lease (FlexiRent) would have avoided this situation because the fleet can be scaled down flexibly.

Staying too long in a short-term rental: A project team needs four vehicles for six months. Instead of taking out a long-term rental, rental cars are booked at a weekly rate. After six months, the costs are twice as high as a comparable long-term rental would have been. FlexiRent would have been the cheaper option from the first month.

Purchase retained as standard decision: A craft business has been buying its vans for years. The vehicles are on the balance sheet, tie up capital and have to be sold at a loss at the end of their useful life. The owner organizes maintenance, insurance and tire changes himself. Long-term rental would have eliminated the administrative burden, relieved the balance sheet and made the monthly costs predictable.

The right choice depends on your specific situation. Instead of making a blanket recommendation, use the following questions as a guide and then compare them for yourself:

How predictable are your vehicle requirements? If you know exactly which vehicles you need for the next three to four years, leasing or SelectRent may be the right choice. If your needs fluctuate, the mix of SelectRent and FlexiRent offers the flexibility you need.

How important is full cost control to you? If you want to pay a single rate per vehicle that includes everything, long-term rental is the model of choice. If you prefer to organize insurance, maintenance and tires yourself and negotiate separately, leasing may suit you.

How large is your fleet? From ten vehicles upwards, the administrative costs for maintenance, insurance and claims settlement become noticeable. The larger the fleet, the more you benefit from the integrated service logic of long-term rental.

Are you planning electrification? With electric vehicles, the residual value risk is more difficult to calculate than with combustion engines. Long-term rental eliminates this risk and makes it possible to switch to a newer e-model at the end of the term.

How important is individual vehicle configuration to you? If your car policy provides for specific equipment, colors or fittings, SelectRent offers the same configurability as a leasing contract, with the advantage of integrated services.

If you have opted for long-term rental, the next question is: which of the two models from MHC Mobility is more suitable?

Many companies combine both models: SelectRent for the standard fleet and FlexiRent for anything else that is needed at short notice. The result is a fleet that is planned for stability and can be flexibly expanded at the same time.

All three models are tax-relevant for commercial customers, but differ in the way they are treated for tax purposes:

Long-term rental: The monthly rental installment is fully tax-deductible as a business expense. There is no investment item in the balance sheet and no depreciation. The services in the installment are also deductible.

Leasing: The leasing rate is deductible as a business expense. However, insurance, maintenance and tires must be deducted separately, which increases the documentation effort.

Purchase: The vehicle is depreciated over its useful life (usually six years). Ongoing costs are deductible separately as operating expenses. Depreciation links the tax advantage to the useful life.

The non-cash benefit rule applies to the private use of company cars for all models: 1% of the gross list price for combustion engines, 0.5% for plug-in hybrids and 0.25% for purely electric vehicles (BLP up to €70,000). This regulation applies regardless of whether the vehicle is purchased, leased or rented.