What is it?
You wouldn’t buy something that loses money, so why should it be different when it comes to cars? Luckily, car leasing is a great solution to this.
Leasing a car is effectively a long term rental. You agree to a fixed monthly fee spread across a certain time period, but you’ll be fine to use the car however you see fit – take it abroad, or apply livery to the vehicle. As long as the car is not damaged, you are fine to treat the car as your own.
Although the car’s mileage and age will increase through daily usage, the depreciation costs are absorbed by the vehicle funder.
How is my monthly lease price calculated?
First up is the initial payment, which is how much you can afford to pay in advance – like a deposit as it is deducted from the full amount borrowed, allowing you to spread what’s left over the length of the lease. That is the only similarity to a deposit, as the initial payment is different.
Initial payment is different because you choose how much you pay up front (between 1 and 12 months, but you can also choose a set amount) and it is adjusted depending on the lease length you have selected and the annual mileage you need.
Then, the vehicle funder company will work out what the ‘residual value’ is of the vehicle. Simply put, they will estimate how much the vehicle will be worth at the end of your lease contract. So, vehicles that can hold their values well tend to offer the best deals.
Mileage is also taken into account. Funders will have the responsibility to sell the car after the lease, and as such, they will need to predict what mileage the car will be returned with. The monthly price is likely to go up if you increase the mileage allowance. However, most contracts are based on 10,000 miles per annum which tend to suit the majority of drivers.
What benefits can I expect from leasing my vehicle?
- Road tax (Vehicle Excise Duty) – is included for the full duration of the agreement.
- Fixed monthly prices. Lease new cars without worrying about any interest charges.
- Cheaper than taking out a personal loan or finance for a new vehicle.
- An option to add maintenance to your contract helping you control costs.
Personal or business leases – are there any major differences?
Nope! Sometimes you may find that some lease offers are cheaper through a business contract or vice versa. But this tends to be very rare.
- Personal contracts just include VAT (value added tax) into the monthly lease payments.
- Business contracts quote without VAT as some are able to claim this back.
What’s included in my lease contract?
Although you don’t own the vehicle, all vehicles supplied to you will be exactly the same as if you were to buy them, meaning you’ll still have a vehicle of your choice with added options and two sets of keys delivered right to your front door.
All vehicles supplied by us will be brand new, allowing you to enjoy the full benefits of vehicle warranty and breakdown cover without any hassle or unexpected charges.
You even have the option to include maintenance in your contract, which is great for those who want to control their costs in one amount. Add this to your contract and you’ll have all your servicing, tyres and maintenance included with the total monthly payment.
What happens at the end of my lease contract?
Before the end of your contract, you’ll be contacted by the vehicle funder to arrange a collection day to return the vehicle. Your car will then be inspected for mileage and vehicle condition. Presuming that you haven’t gone over your mileage limit and you’ve returned the car in a reasonable condition within the standard fair wear and tear, you shouldn’t be liable for any extra charges.
You’ll never have to go through the hassle of advertising your car for sale on various websites, then finally finding the right buyer but ending up selling the vehicle for less than you had anticipated.
Is there anything else I should know?
What a conveniently asked question! We’ve got a complete glossary to car leasing terms you should be aware of before looking at any type of lease. Find out more here.