There are significant differences between owning a car and leasing a car, so here is what you need to look out for.
These days, the option to lease a car is becoming more and more appealing.
After all, when you lease a car, you will be able to replace your vehicle with a brand-new model every couple of years. If you choose this option, you will also have a fixed monthly payment during the lease term.
A car lease deal allows you to pay for a car while you need it and then return it or change it for another vehicle with no increased hassle. You can also benefit from warranties and lower repair costs, affordable monthly payments, manageable deposits and down payments, and no ongoing obligations in addition to your regular payments.
However, there are significant differences between owning a car and leasing a car, so here is what you need to look out for.
When you choose to lease a car, you should know that some providers will offer deals that include insurance within the monthly rentals. These can sometimes be branded as “total care” or “complete care.” This option means that all you need to pay for is fuel and any repairs or replacements caused by driver error.
Without a deal like this, It’s your responsibility to arrange an insurance policy for the vehicle. Most insurance companies are fine with covering a lease vehicle, but sometimes your car leasing company may insist that you take out fully comprehensive cover rather than a third party.
The residual value estimates how much the vehicle will be worth at the end of a lease. It is a critical component of a good lease and is usually expressed as a percentage of the vehicle's manufacturer's suggested retail price (MSRP).
This factor is essential because the higher the residual value is, the lower your lease payment will be. When you lease a car, you pay for the difference between the selling price and the residual amount spread out over the lease’s life. The higher the residual amount, the smaller that difference will be.
Most car leasing deals will include restrictions on the annual mileage you are allowed to drive, which will affect your monthly payments. There may also be restrictions on whether you can drive the car abroad, and you may need to ask permission to do this.
When it comes to mileage, before signing the deal, you should choose a week that is representative of your regular driving habits and multiply the total miles covered by 52. After doing this, add in five percent extra of your total yearly miles for any unplanned journeys.
Mileage allowance is calculated over the contract term, and any excess mileage will be billed at the end of the contract. The cost of excess mileage can vary between different companies but it will be clearly explained to you before the start of your agreement.
Most car dealerships offer deals that give you between eight and twelve thousand miles per year, so make sure to set up a different arrangement if this does not suit your needs.
Wear and tear
When you return the vehicle at the end of the lease agreement, you may be liable for any costs of repairs for anything above general wear and tear. Similarly, you are not allowed to customize the vehicle with modifications such as a new stereo system, alloy wheels or spoilers, etc. You will be charged for any costs of correcting these.
Of course, none of this matters if you have selected the option to purchase the car once the lease is up. That way, a lease becomes nothing more than an extended test drive that will lead you to the vehicle of your dreams.
Maintenance and warranty
Once you lease a vehicle, it is covered by precisely the same manufacturer-backed warranty as a fully purchased car. This allows for any non-consumable parts that go wrong within this period to be replaced at your local dealership free of charge. Check with your dealership to see how long the period of the manufacturer’s warranty is because there is a slight possibility that it could run out before your lease is up.
With shorter or low mileage leases, there’s less of a risk that you’ll need repairs for wear and tear items on your vehicle. This is especially true with one and two-year agreements because the manufacturer’s warranty will most likely cover you for any electrical or mechanical problems that aren’t due to driver error.
However, if you’re looking at leasing a car for as long as four years, or plan to drive 30,000+ miles each year, then a maintenance package is a sensible option for keeping your vehicle in good condition.
Be aware that it will be your responsibility to have the car serviced in line with the service intervals recommended by the manufacturer.