Smart Financing: Your Essential FAQ Guide to Choosing the Best Leasing Company in Sri Lanka

Vehicle and equipment leasing is a vital financial tool in Sri Lanka for both individuals and businesses. However, navigating the terms, interest rates, and regulations can be complex. This guide answers the most Frequently Asked Questions (FAQs) to help you choose a reliable leasing company and secure the best deal.

1. The Core Decision: Banks vs. Finance Companies

FAQ: Should I choose a licensed commercial bank or a registered finance company for leasing?

Both Licensed Commercial Banks (LCBs) (e.g., Bank of Ceylon, Commercial Bank) and Registered Finance Companies (RFCs) (e.g., LOLC, Central Finance, LB Finance) are authorized to provide leasing facilities under the Finance Leasing Act.

• Banks (LCBs): Often preferred for stability, potentially lower benchmark rates, and the convenience of having all your financial services (accounts, loans) in one place. They may have a stricter approval process.
• Finance Companies (RFCs): Known for being more flexible, offering faster approvals, and providing tailored repayment plans to suit seasonal or irregular cash flows (e.g., for self-employed individuals or SMEs). They tend to specialize heavily in leasing.

The verdict: Look for a company registered with the Central Bank of Sri Lanka (CBSL), regardless of whether it's a bank or an RFC, to ensure regulatory protection.

2. Rates and Repayment Flexibility

FAQ: What is the most critical factor to compare when selecting a leasing company?

The most critical factor is the Effective Annual Interest Rate (A.P.R.) or the Reducing Balance Rate, not just the advertised 'Flat Rate.'

• Flat Rate vs. Reducing Balance: Most companies advertise a Flat Rate (a percentage of the initial lease amount), but the true cost is higher. Always request the Reducing Balance rate to accurately compare offers, as this rate applies the interest to the declining principal balance, reflecting the real cost of borrowing.
• Terms and Duration: Most leases run for up to 5-7 years. A longer term means lower monthly rentals but a higher total interest paid. Choose a tenor that aligns with the asset's useful life and your budget.

FAQ: Can the repayment plan be customised?

Yes. The best companies offer flexible repayment plans structured around your specific income pattern. If your income is seasonal (e.g., tourism or agriculture), you can negotiate:

• Balloon Payments/Residual Value: Paying a larger lump sum at the end of the lease to reduce your monthly rentals significantly.
• Structured Payments: Higher payments during peak income seasons and lower payments during off-peak months.

3. Understanding the Financial Fine Print

FAQ: What are the main up-front costs and fees I need to budget for?

Beyond the down payment (or initial rental), you must budget for the following mandatory charges:

• Down Payment / LTV Ratio: The Central Bank mandates a maximum Loan-to-Value (LTV) Ratio, which dictates the maximum percentage of the vehicle's value the leasing company can finance. You must pay the remaining amount as a down payment. Always confirm the current LTV cap for your specific vehicle type.
• Stamp Duty: A statutory government tax based on the facility amount.
• Insurance: Comprehensive insurance for the leased asset is mandatory for the entire period, as the asset's legal title belongs to the leasing company.
• Valuation Fee & Documentation/Service Charges: Administrative charges for processing the lease and the valuation report (for used/registered vehicles).
• CRIB Report Fee: The charge for obtaining your creditworthiness report from the Credit Information Bureau of Sri Lanka (CRIB).

FAQ: Is an early settlement of the lease possible, and will I save money?

Yes, pre-terminating a lease is possible and usually results in a rebate on the future interest you would have paid. However, the exact rebate calculation and any penalty fees vary by company. Always confirm the early settlement clause in your contract.

4. Application Process and Documentation

FAQ: What basic documents are required for a lease application in Sri Lanka?

While requirements vary, all applicants (individuals and corporates) must provide documents proving identity, residence, and, crucially, repayment capacity:

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