Cheap Car Leasing
The two most common ways of financing a car are PCH and PCP. If you are comfortable with renting a new car for a set period, then car leasing might be the perfect choice for you. We wrote the basics here for you so you can decide whether you want to try car leasing out.
What’s Car Leasing?
Leasing a car is pretty similar to leasing or renting anything else, like a house or a flat. If you rent a flat, the first thing you’ll do is pay a deposit, and then you get to use it for an agreed period. During that period, you’re paying a set amount every month. When the contract ends, the property is the landlord’s again.
It’s pretty much the same with car leasing. You’ll be paying a fixed monthly amount, and you’ll pay a larger amount at the beginning that will act as a deposit. A 24-month contract listed as 6+23 will mean the first monthly payment is six times the usual amount.
Unfortunately, you won’t own the car, and at the end of the deal, it goes back to the leasing company. You also won’t have the option to buy it. If they find any damage during the inspection, you’ll have to pay for it. You’ll also get extra charges if you’ve exceeded the mileage limit.
How Does It Work?
Usually, you’ll lease a car from a finance company or directly from the manufacturer. The deal you’ll be offered depends on several factors like the model you choose, how many miles you’ll do, and how long you want to keep the vehicle.
The car won’t be your property, but as the new vehicle depreciates fairly quickly, it will be worth much less once you get it back. Most leasing companies sell on the car once you get it back, so the leasing pricing model functions by covering the loss in depreciation plus a margin for profit.
Because leasing companies buy several vehicles at the same time, they usually pay much less for a brand new car than individuals. This makes the amount of depreciation lower. Sometimes this means that leasing deals can be competitive. It’s an opportunity for you to get a new car for less money.
Should I Choose Leasing?
We have a list of pros and cons to help you figure out whether leasing is the option for you or not. The most important thing is that you can live with the cons that are listed. If you can’t, you should search for other options.
Pros:
- You won’t have to worry about how much value your car loses during the term.
- You’ll be covered by warranty.
- You’ll probably have the lowest monthly and upfront costs.
- Road tax and breakdown cover will be included, and servicing too sometimes.
- It’s fairly simple. You pay on a monthly basis and then return the vehicle to the company.
Cons:
- You’ll have a mileage limit. You’ll pay more if you exceed it. This is bad news if you like driving a lot.
- Even though the monthly payments are low, you’re not the one getting the money once the car is sold.
- You could get high charges if you damage the car.
- You’re not the owner. You’ll only be driving the car for the length of the deal.
- If your car gets written off, and the insurer’s value is less than the company’s, you might have to pay for the difference.
You can search for many lease deals online by entering the model you’re looking for, your budget, the contract length you want, or the type of car you want. Working out the total cost of the deal will help you choose the best deal.See The Best Car Leasing Deals »
How to Choose a Deal
The leasing contracts usually last two to four years. The length determines the cost of the deal, so you can play around with it. You also need to determine the mileage limit. More miles usually mean you’ll have to pay more.
You can search for many lease deals online by entering the model you’re looking for, your budget, the contract length you want, or the type of car you want. Working out the total cost of the deal will help you choose the best deal.
After that, you can compare this to other types of finance. If it’s higher than the amount you’d expect to lose in depreciation, it’s probably not a good value deal and vice versa. It’d be wise to check out how much you’d pay if you exceed the mileage limit as well.
Is It Cheaper Than Buying?
Since vehicles always depreciate, it’s not a good investment. But if you buy it, you’ll be able to cash in its value once you’d like to change it. It’s different when you lease a car because you know that you’ll get nothing at the end of the term. The question you need to ask yourself, therefore, is whether the amount you’ll pay during the lease term is higher or lower than the amount you’ll lose by owning the car and then reselling it over the same period. If it’s lower, leasing is cheaper for you than buying. If it’s higher, it’d be wiser to buy the car.
You should know that most leasing companies don’t include servicing and maintenance costs, so you’ll have to pay for them on your own. You might get offered a maintenance package, though.
What Happens at the End of a Lease?
When your contract ends, you’ll usually arrange for the car to be collected or returned. You may also have the option of extending the lease – it’s worth contacting the company a few months before the end to check if that’s possible. You could even get offered a discount on your monthly payments.
You won’t have to pay anything else in the end if there’s no damage beyond the normal wear and tear. If there is damage, you’ll receive a bill to cover the charges. Once the car has been returned, you won’t have an option to get other quotes, so it’s best for you to get any major repairs before the inspection.
If you’ve exceeded the mileage limit, you’ll have to pay around 10p per mile usually. Check how much it is before taking out the lease.
