Car leasing has become increasingly popular over the past few years, and it is reported that 18-35 years olds are leasing almost 50% more cars than they were in 2014. Leasing a car has many advantages, with one of them being the fact that you can have access to a safe and reliable vehicle when you need to, without having to fork out for some of the associated costs of vehicle ownership.
If you’re in the market for a brand-new car and have considered buying one outright, then you owe it to yourself to consider the possibility of leasing instead. Here is everything you need to know about leasing a car so you can find out if it’s the best choice for you.
Car Leasing Explained
So what exactly is leasing? Basically, it’s like renting a car, but on a considerably longer term. Just like with the housing market, many people find it more beneficial to rent rather than buy. Leasing a car is a very similar principle. When you lease a car, you pay a monthly fee to use the car for a defined amount of time and miles.
The company that decides to lease you a vehicle is essentially lending you the money for it by buying it for you. You then pay for it gradually month by month, similarly to a mobile phone contract. As a result it’s worth bearing in mind that you will need to pass a credit check in order to lease a car.
Advantages of Leasing a Car
There are several advantages to leasing a car. As well as fact that you can drive an expensive car for a fraction of the price of owning it, people choose to lease for a variety of other reasons.
When you lease a car, you don’t have to worry about routine maintenance or repairs. Lease cars are brand-new, and any faults covered by the manufacturer’s warranty. With regards to servicing, all you need to do is make a phone call and book it in at an approved service centre once per year. So if you’re not particularly handy with a set of spanners then leasing can be a much simpler way to own a car as opposed to buying a used one that may have some problems.
Monthly payments for leasing a car are a lot lower than the finance payments that you’d have to pay if you were to purchase the same car on HP. This means that even more people can afford to buy brand new cars, and high-end cars are also more accessible. Ever wondered why you see so many young people driving premium cars?
Another advantage of leasing is the fact that once the agreement is over, you simply hand the car back and it’s gone. You don’t have to worry about the costs and problems associated with selling a vehicle. One thing worth noting though is that you will liable for any damage to the car that is considered beyond wear and tear or unreasonable. You will also be liable for the excess mileage charge should you go over your agreed annual mileage. Once all this is sorted, you’re free to start a lease on another new car – so you can always have the best cars with the latest technology and safety features.
Are there any Risks?
As with any kind of finance there are of course some risks when leasing a vehicle. As you do not actually own the car that you are leasing (the lease company does), you need to ensure that you keep it well maintained. As the vehicle is new, any faults will usually be rectified under the warranty. However if you fail to keep the car in a suitable condition you could be charged extra at the end of your lease. Remember that the company who own the car will want to sell it again, so it will need to be in excellent condition throughout. You can be penalised for even the slightest bit of damage if it fals out of the scope of normal wear and tear. So budget for a new set of tyres at the end of your lease if you like to race around, or rim refurbishment if you keep scraping those kerbs.
Don’t forget that you will also be penalised for not keeping within your agreed mileage. The excess mileage charge is normally calculated per mile and can vary depending on the provider. The typical excess mileage charge is 6p per mile, which may not seem like much, but if you do 30,000 miles instead of 20,000 that will cost you £600. Premium cars tend to have even higher excess mileage charges.
Terminating a Lease Early
Just like with your mobile phone contract, you will be expected to keep to your side of the deal until the end of the contract period. If you terminate the contract early and try to return the car before the lease is up then you will have to pay a penalty which can be very expensive – you usually have to pay the total cost of the remaining instalments on the lease.
Some leasing providers will allow you transfer the lease to someone else with their agreement, but this can be a very complicated process. It’s often best to just hang on to the car until the end the contract.
So is your short on cash but still want to drive around in a nice new car, then leasing is the perfect option for you. Even if you’re not short of money, leasing a car means you can drive a premium vehicle for a fraction of a cost of actually owning it.