With this guide to leasing, you no longer have to wonder what all the hype is about car leasing and why your friends and family are reinventing the way they drive a brand-new car.
To help you understand the difference between buying and leasing, Rex Leasing has put together a list of key differences for you to consider before driving away in your brand-new wheels.
The initial rental cost required for leasing is much lower than the deposit needed for a buying brand-new vehicle and certainly much cheaper than saving up to buy the car outright. This makes leasing a more viable option for drivers who have limited funds available for a deposit. The ongoing lease cost tends to be lower too - and it’s fixed each month, so you know what you’re paying.
To obtain a lease contract you will need to be approved by the finance provider, so a good credit history is essential. This means drivers with a poor credit score may wish to consider buying a new or used car outright to avoid the credit check.
In the case of vehicle leasing, you never own the car: you pay monthly to your contract provider and at the end of the contract you simply return the car to them. This could be considered as a great advantage because you can swap it for a new car every 2-to-5 years without having to sell your existing vehicle.
Owning a car is often seen as a big investment with very little return at the end of its life. The automotive industry is highly competitive and advancement in technology and design inevitably lead to depreciation of older vehicles. On average, new cars lose more than half of their value in the first three years of ownership. If you lease, however, you don’t have to worry about the vehicle’s depreciation as at the end of your contract, you simply hand the vehicle back.
When you lease a vehicle, you will agree on an annual mileage allowance with the leasing provider, the amount of which will have an impact on your fixed monthly rental. If you keep within your annual mileage, you will have no additional costs at the end of the agreement, but if you exceed your pre-agreed mileage, you will be required to pay an excess mileage fee which is usually a pence per mile. However, the excess mileage charge is usually 2-6pence depending on the vehicle, so you’re never going to be charged hundreds of pounds at the end of the contract.
Owning your car will set you free from any mileage limits, but the relationship between high mileage and a lower vehicle value is a shared negative for both leasing and owning a car.
Maintenance and Servicing
Owning a car means that everything is paid by you. For lease agreements, customers have the option to purchase a maintenance package which provides cover for all scheduled manufacturer servicing and replacement tyres, bulbs, starter motors (except where the damage is due to misuse, abuse or vandalism or where fraud is suspected).
When you lease a car, you never own it during the contracted period which is why you are only allowed a limited number of reversible modifications. Any removals or additions to the vehicle will be at your own risk and could invalidate your warranty.
Wear and Tear
Even though you don’t own the vehicle when you lease it, Wear and Tear is still your responsibility as a customer. The BVRLA (British Vehicle Rental and Leasing Association) provides general guidelines for fair wear and tear which include information on general appearance, road safety, interior condition, paintwork, body and so on. Each finance provider has their own guidelines which you need to check and make sure you comply with upon return of the vehicle to avoid high end-of-lease charges.
If you are a business owner, you may get positive tax benefits through business leasing. Leasing is particularly popular with VAT registered companies as they can claim back the VAT for the supply of the vehicle.
Whatever option you choose, both buying, and leasing have their benefits and drawbacks. Owning your car gives you some flexibility in the decisions you make regarding your car, however, leasing takes away a lot of the hassle that comes with owning a car and will probably save you money in the long run.
Before making your decision, it’s worth investigating all options available to use to ensure you choose a finance option to suit your needs.
Regardless, Rex Leasing can help you with both. Give the team a call today on 622111, and let's discuss whether a purchase or a lease will suit you and/or your business better.