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Leasing a car from an online dealer or broker often works out more cost effective than taking out a car loan or engaging in the other methods of car finance. However, before you take out a car leasing deal it is important to understand the pros and cons.
If you take out a car lease over a short period of time (typically two-four years) it will almost always work out cheaper than a car loan and it is normally just as cost effective or cheaper over a medium term too. This is because you are paying the difference between the sale price and the residual value, rather than paying the full price of the car plus interest.
Car leasing is also a good option for those who don’t have a large sum of cash to use as a down-payment. Though you are usually asked to pay an initial sum, typically to the equivalent of three monthly payments, this is the only money you are required to pay up front. Consequently if you don’t have a large sum of money stored away, but do need a car quickly, car leasing is likely to be for you.
Indeed car financing will place less of a strain on your finances over a monthly period too as it typically works out cheaper than most purchasing options.
However, the key to car leasing is the flexibility it offers.
With car leasing you have the option to simply hand the car back to the dealer at the end of the leasing period. This allows you to keep yourself in a modern car, constantly driving a ‘new’ vehicle – which is particularly useful for people with their own business who want to convey an image of being modern and successful. It also offers you a ‘way out’ if you are unhappy with the vehicle in any way – perhaps it hasn’t lived up to your expectations or wear and tear has taken its toll.
Alternatively, if you are happy with the car you have leased you can simply take out a new car lease with the same dealer. Some car leasing companies will even give you the option to purchase the vehicle outright.
With car leasing you also have more options available in terms of the vehicle you choose. Typically, luxury cars such as BMWs, Jaguars and Mercedes are particularly popular with lessees as they hold their residual value – as you are paying much less on the car than you would be if you were buying it outright you can often afford to drive around in a much higher class of vehicle. Of course, you should only take on repayments that you can comfortably afford.
Other benefits of car leasing include the special offers that might be available from car leasing companies. These will be explained in depth in the next section, but advantages can include service costs and road tax being thrown in as part of your policy.
SUMMARY OF CAR LEASING BENEFITS
Here is a quick summary of the extensive benefits associated with car leasing:
- Lower payments – Your monthly payments will be lower with a lease than purchasing options.
- Lower down-payment – Typically you will only be asked to pay the first three months ‘up-front’.
- More options – Due to the lower expenses you can often afford cars that were previously out of reach, financially (though it is important to stick closely to your budget).
- More choices – At the end of the agreement you can simply walk away from the car or choose to take out another lease.
- Additional benefits – Some car leasing companies may carry special offers and be willing to include servicing, maintenance and road tax as part of the leasing agreement.
DISADVANTAGES OF CAR LEASING
While car leasing will prove to be the right option for most, the other car financing options will offer a better solution in certain circumstances. Here are some important factors to consider before you lease:
- You won’t own the car – Though the flexibility to lease another car will be an advantage to some, for others never owning the vehicle will present difficulties – if you don’t make repayments your car can be repossessed.
- Watch out for other charges – When estimating the residual cost of the vehicle to determine your payments, the leasing company will ask you to stick to an annual mileage limit. For most, this won’t be a problem, however, if you do exceed this limit you could face additional charges. Also, you could be charged for any damage to the car if you choose to hand it back at the end of the lease period.
- Car insurance – Remember that as you are effectively driving someone else’s vehicle you must take out a comprehensive car insurance policy.
- Settling early – Some car leasing companies will charge you interest for the remaining months if you attempt to settle your lease early.
WHERE TO GO FOR CHEAP CAR LEASING DEALS
If you decide that car leasing is right for you, it is best to search for a leasing deal online. As online dealers and brokers have fewer overheads than most high street dealers, you will generally find cheaper quotes if you look around online. There are some websites, such as ContractHireAndLeasing.com, which allow you to search for thousands of leasing deals for the vehicle of your choice in minutes. Make sure you shop around online from the list of brokers and dealers it lists before you settle on the right car leasing deal for you.
In part three of the car leasing guide we will examine the special offers that are available in the leasing industry, how they come about and what factors influence them.
Move on to part three of the car leasing guide…
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