What is leasing?
In simple terms, leasing a car is very much like taking out a long-term rental.
Usually there is a down payment which is equivalent to a few month advanced payments, followed by number of monthly payments until your initial contracts runs out.
Leasing is usually only offered on brand new cars on contracts with usual terms falling between two and four years.
You can think of it as similar to choosing to rent a house rather than buying it outright. You get to live there and treat it as your own, but the landlord remains the legal owner and you continue paying them until you want to move out, or you get kicked out.
Deals structure
Two terms we need to clarify first, initial payments and then a monthly payment.
The ‘initial payment’ is how much you have to pay up front and is usually shown as 3, 6, or 9 times the monthly payment.
This ‘initial payment’ means your first month’s payment will be higher than monthly payment.
For example, a 3+35 deal requires an initial payment of equivalent to three months downpayment to secure your lease and to cover the first month of ownership.
You’ll then pay a further 35 monthly repayments. This also means that the total term is 38 month .
Ownership
As mentioned before, when you lease a car, you won’t be its legal owner – it’ll be owned by the leasing company that supplies the lease deal.
You’ll get to treat it like your own car but, at the end of the agreement, you’ll have to give it back.
This leasing plan won’t suit you, if you prefer to keep the car, however if you fancy a new car every few years, then it might be worth thinking about.
There are however number of advantages,which comes with not actually owning the car.
First – the car you lease most probably will never be more than a few years old so the likelihood of it going wrong is much lower than an older car.
Second – the length of your lease is very likely to fall within the car’s warranty period so should the car fail, it’s the leasing company’s responsibility to resolve the issue.
Warranty
The lease car will be covered by the same manufacturer-backed warranty as if you’d bought it outright. This means that if any non-consumable parts go wrong within leasing period, you are able to get them replaced at your local dealership for free.
Many car warranties are at least three years long and most lease agreements also last for three years so chances are you’ll have warranty cover for the entire length of your lease agreement. You should check this, though, because manufacturer’s warranty periods can vary.
Maintenance packages
Your warranty should probably cover you should anything go wrong, but it’ll be your responsibility to have it serviced in line with the manufacturer service intervals.
Generally maintance packages will add a few pounds to your monthly repayments but could save you money in the long run, so it might be worth keeping this in mind and discuss it with the dealership you are leasing from.
Tax and MOT
The majority of lease agreements also include your road tax as part of the cost. What’s more, new cars don’t need an MOT certificate until they reach three years old. So unless your agreement is longer than three years, you won’t have to worry about getting it MOT’d either.
Insurance
Sorry but this one is on you. You still have to arrange your own insurance cover for your lease car.
The end of lease
At the end of your lease deal, you just hand the car back to the leasing company. Your leasing company will usually arrange a time to come and pick it up.
Your leasing company might offer to arrange another agreement to start once your current one finishes. If you decide to do that, the leasing company can typically arrange to drop your new car off when they come to collect your old one.
Just be aware that you might have to pay extra charges if you’ve gone over the mileage you agreed in your lease contract. You will also have to pay for any damage that exceeds fair wear and tear so it pays to take good care of your lease car.
