You hear a lot of good things about car leasing from dealers and manufacturers. But is it a good idea? The truth is that it depends on your situation. Sure, leasing a car can give you a chance of driving your dream wheels. But over the space of three years you can spend a lot of money and end up with nothing. So if you are thinking about a lease deal, read this article first. It should help you make the right decision…
First of all, let’s take a look at the advantages of leasing a car. We’ve tried hard to avoid the noise you sometimes hear from dealers and manufacturers to give you the genuine benefits. Ready? Then let’s get the ball rolling:
Leasing a car gives you a much wider choice than going on Higher-Purchase, getting a loan, or buying a car outright. The reason? You are renting it. You won’t get to keep it at the end of the loan period (more on that later), so the payment amounts are dramatically reduced.
Put simply, leasing is a great way of getting some nice wheels if you don’t have the savings to spend yourself. It is almost an essential service if you don’t have the credit to get a good loan deal.
This means that you can look for a car that would normally be out of your price range. So, that BMW that you always wanted but could ever afford? It could be well within reach for just a couple of hundred pounds a month. Not sure what to go for? We have some valuable tips here that can help.
Good For Business
Car leases are popular with a lot of businesses. The fixed monthly payment suits them down to the ground. They are also tax deductible so that the payments can come straight off the end-of-year balance sheets.
So, where do you find one for your business? Certain companies only offer leases for private customers, while others specialise in business contracts. You can make a start by viewing available contract hire options, jot down the relevant information, and then compare the costs on an easy-to-read spreadsheet.
Low Monthly Payments
As we mentioned earlier, the payments you make for a car lease are a lot less than it would cost to pay back a loan over the same period. This makes it a very good option for those who have a regular income but also have difficulty raising finance.
Fewer Repair Costs
Car repairs can cost a fortune, as we all know. If you get a car lease, make sure yours has a bolt-on agreement for basic maintenance and repairs in the terms and conditions. This means that you should have coverage for anything that goes wrong with the car, assuming you are not at fault.
Businesses love these kind of lease agreements, as you can imagine. Organising repairs and paying for them is costly in both money and time. Having an agreement where everything is taken care of is worth the little extra you will pay.
Regular New Car
Although you won’t get to keep a car at the end of a lease agreement, you can just choose another one. Lease agreements tend to last three years or so while the average car lasts for ten years. This means that – assuming you look after it – you will have a brand-spanking new car on a near-permanent basis.
Car leasing isn’t all sweetness and light. Here’s why:
A Question Of Money
A lot can go wrong with leasing cars, as this New York Times article can testify. The trick is to make sure you read all the small print, and badger your dealer to come clean about the costs. And I mean ALL the costs.
Although, in principle, your monthly payments will remain the same, you have to make sure you know where you could get stung. Sadly, it happens more than it should.
Mileage is the biggest issue with leasing a car, especially if you are using it for business. Because you are renting the car, dealers and manufacturers like to know that it isn’t being abused. That means they have strict rules about the amount of miles you can drive.
This can be incredibly frustrating. And expensive. The charges for going over your mileage can be eye-watering, so make sure you are aware of the limits before signing up to an agreement.
Terms & Conditions
All these problems are often caused by one particular document: the terms and conditions. Lease companies can be incredibly confusing in what they expect, and it is sometimes hard to believe they don’t do it on purpose.
A key thing to look out for is penalty charges – like those you will face if you give up the car earlier than the agreement period. Wear and tear charges at the end of the lease can also hit you hard in the pocket.
As you can see, what seems like a good deal can quickly turn into an expensive mistake. Unless you read the T&Cs properly and know how to avoid the stiff penalties, it is likely you are going to get stung.
Of course, the major issue with lease cars for many people is that you are effectively throwing money at nothing. Although monthly payments are small, by the end of a three-year period you may have paid a significant portion of the cost of the car. But you end up with nothing.
There have been moves by the car lease trade to change things a little. Recently, some companies have started to offer car leases with an option to buy at the end of it. However, you will still be paying over the odds.
So, there you have it. All the pros and cons of leasing a car wrapped up in a single package. Everybody’s situation is different, and there’s no doubt that leasing works for some people. And if you can view renting a car as you would rent a house, that’s probably half the battle.