Leasing a car is a relatively new method of financing, but it does have plenty of benefits. Not only do you drive away with the latest model, but you could you save yourself money, and add a maintenance package, so that with car leasing all you would need to do is purchase insurance cover and add fuel.
What Is Car Leasing?
Leasing is the charge for the use of the car. Vehicle leasing is an agreed contract when you, the driver, pay for the care and depreciation of a car during the term of your lease. Typically, vehicle leasing is arranged between the end user and a vehicle manufacturer or through the services of a leasing broker.
Do I Own the Car?
Although you will never own the car when choosing leasing, it does give you the chance to update your garage every 2, 3 or 4 years. However, when you finance or buy a car, it becomes an asset and something that will continue to depreciate in value with every mile that you drive and every year it’s kept.
Personal Contract Purchase (PCP) is the alternative option, and when agreeing your lease, a final balloon payment will be determined. This gives you the option to pay the final balloon payment and own the leased vehicle outright.
The Cost Of Car Leasing
Financing a car is typically more expensive than leasing because a finance contract considers the value of the car from new, as well as the potential value at the end of the contract. A car leasing hire means typically paying less per month to drive a new car, and only paying for the depreciation according to your agreed usage at the start of the contract.
There are three key areas that you can alter to determine the price of your lease. Initial payments are the first payment made by the leaseholder, typically over 3, 6, 9 or 12 months. The higher the initial payment, the greater reduction will be to your monthly costs. The total amount payable will remain the same. The second adjustment that can be made is the period of the lease over 2, 3 or 4 years. As the lease gets longer, the monthly repayments get lower. Finally, mileage will affect the price of the lease with higher mileage depreciating the vehicle and increasing the monthly payments.
Towards the end of your lease you can extend your lease for a further 12 months, hand the car back or begin another leasing term with another new car.
The Rise of Car Leasing
Car leasing is becoming more and more popular with a range of demographics. 56% of millennials surveyed said they would consider leasing a luxury car instead of buying. While 72% of adults questioned would lease rather than buy a car outright. The market is also on the up with 87% of brokers reporting growth in the market according to the Lease Broker Federation.
The main markets for leasing are SMEs, business leasing and private hire. 86% of brokers believe that personal lease contract will rise in the next 12 months. The report also suggests that areas such as fleet management, short term hire and maintenance will support the predicted 71% growth to the sector. The AA Car Purchase index shows that 41% of people are using their savings to pay for a new car. Alternatively 1 in 5 people are taking out personal loans between £1,000 and £35,000 to fund their new car.
Should I Add Maintenance?
Part of the leasing agreement is the maintenance and care of the vehicle. It is up to the registered keeper of the car to ensure that the log book and scheduled maintenance is kept up to date during the contract period. Most leasing firms will therefore offer a maintenance package subject to the length of the hire, vehicle and mileage.
The All Car Leasing maintenance package is an optional extra that comes highly recommended. When a car is returned at the end of a lease, the vehicle is inspected and judged by a ‘fair wear and tear’ policy, such as the Lex FW&T guide as an example. This is to protect the residual value of the vehicles.
The All Car Leasing maintenance package covers regular services, replacement tyres and breakdown cover. Mobile fitters are also available for general problems with exhausts, car batteries, windscreens and tyres. Cover is available 24 hours a day, 7 days a week.
Leasing gives you the opportunity to drive a new car for less than purchasing or finance, and with maintenance, you don’t have to worry about when your next service is due or breaking down on a road trip.