Car leasing has been popular for years in the business sector. But now we’re seeing more and more offers for personal leasing. At a glance it might seem an attractive prospect, but is it really as good as it seems?
What is Leasing?
Leasing is similar to renting a car, but leasing is for a longer period of time. You usually lease a car for between two and four years.
You will have to pay a deposit. The amount depends on the car you want to lease, but you can pay between £200 and £1000. Then there’s also a service charge of between £100 and £200. You can also make voluntary payments for other insurances.
You have a brand new car to drive. When your contract is up you can just go and pick up another new car. You shouldn’t have to pay any repair bills for faults that occur during the warranty period. Great eh? But wait. Now we’ll go through the disadvantages. It’s a much longer list. Read it carefully.
The car is never yours although you are responsible for it. When you hand it back it must be in good condition. You will have to repair any interior damage or exterior bumps and scratches.
Your contract will have mileage restrictions. You can choose your mileage, but the more miles you want, the more the car will cost you. If you choose the standard mileage you might have to stop taking long road trips. Or you’ll have to watch your mileage carefully. That could a pain. If you exceed your mileage limit you’ll have to pay the leasing company when your contract is up. Extra mileage is normally charged on a pence per mile basis. The amount depends on the car you’ve leased. Typically, charges are anything between 3p and 10p a mile. Premium cars charge more. BMW, for example, is 50p a mile.
You will probably need permission to take your leased car abroad. This will mean obtaining permission from the leasing company. It could mean an exchange of paperwork. That will put paid to any last minute trips you want to take outside the UK. No more saying to your partner “how do you fancy Moules Mariniére in France tomorrow.”
If you have an accident and your car is a write-off, you may have a problem. Your insurance company will replace the car if it’s under a year old. But, if it’s older than that you will only get the market value.
You must be careful if the leasing company has a higher write-off value than your insurers. It means you will have to pay the difference which could leave you out of pocket.
Extra Insurance Payments
To be fully covered, (remember you have to give the car back in good condition), you’ll need to take out extra insurance. First of all, there will be your usual cover. Then, if you want maintenance insurance and cover for any scratches and bumps, that will cost you more. Finally, there’s Gap Insurance. This is to protect you from the money you’ll have to pay due to the write-off difference.
Here’s an example:
You decide to rent a small VW Golf Hatchback. The leasing company want £258 a month. You then add maintenance at £25 a month. After that GAP Insurance. Depending on where you buy this it can be between £55 and £325 a year. Let’s make it £150 a year for four years. That’s £12.50 a month. Finally, you want cover for bumps and scratches at £8.00 a month. A total of £303.50 every month.
At the end of four years, you will have spent £14,544. The car’s not yours, so you can’t sell it and get some money back. It’s not the best investment in the world.
A better deal
What if you got a 48-month personal loan from your bank? We looked at Santander. They are offering £11,700 over a 48 month period for £258.76 a month. You can use the deposit you would have paid for the lease car to pay the interest of £720.
That gives you enough money to buy a small brand new car. Have a look at the list from carbuyer or use our concierge service and we’ll advise you how to buy a second-hand car.
Having a car that’s all your own means that you can drive as many miles as you like, where you like. You won’t have a panic attack if you spill something inside it and when you sell you’ll have some cash in your hand.