6 Questions to Ask Before Leasing Your First Car
Leasing is fast becoming a popular method of financing a car. Indeed, it’s likely to be one of the reasons new car sales in the UK have been so buoyant, as more motorists are buying new and replacing their car more regularly than has previously been the case. So leasing your next car could be a good option, but it pays to ask yourself a few questions first to discern whether it is the right choice for you.
Ask yourself the following:
1. What is my monthly budget?
The beauty of leasing is you can set a monthly payment limit and either spec your chosen car to that budget, or choose a model that falls within those financial parameters.
Many leasing companies supply several makes of car and so you can use their website to check prices on various versions of your chosen model or a variety of different makes and models.
2. How many miles will I cover?
Don’t be tempted to choose a low mileage in the interests of a lower monthly rental; if you exceed your agreed limit you’ll be charged for excess mileage at the end of the agreement.
3. Do I want a maintenance package?
Many leasing agreements offer the option of a maintenance add-on. For a little extra per month, the servicing and routine maintenance throughout the agreement is covered. Some include replacements such as new tyres, so if this is of interest check what you get for the extra money.
Be careful of adding extras; your monthly rental will increase incrementally as you add options, so don’t get carried away.
4. Will I miss the ‘flexibility’ of purchase financing?
Leasing is straightforward in that you lease the car for a certain period and give it back at the end of the agreement. Other types of finance such as a PCP (Personal Contract Purchase) possibly offer a degree of flexibility in that you can do the following:
- Pay it off early by paying a settlement figure (hire purchase and PCP) or the balance (in the case of a loan)
- Sell the car early (having usually settled the finance first)
Because you’re not buying the car when you lease, then it’s simply a case of paying to hire it monthly. Some leasing companies may provide an option to either buy the car outright at the end or extend the lease.
5. Do I need a business or personal lease?
It may be obvious which option you choose, but it’s important to be clear. A business lease is subject to VAT but this will only help if you’re self employed and VAT registered – or your business is – as you can often claim a percentage of the VAT back.
Personal leases are inclusive of VAT. Other financial factors may influence your decision when considering leasing for business, so think carefully and maybe take suitable professional advice from your accountant.
6. Will the car suit my needs long term?
You’re committed to your choice of car through the term of the lease, so be sure it’s suitable for your needs. Choosing carefully is vital; ordering something desirable but impractical could cause issues down the line.
If you think your needs may change, choose a shorter lease term.
Leasing is a very cost effective and straightforward way to run an up to date car and change it frequently without worrying about depreciation and possible mechanical issues with ageing models. Answering the above questions honestly will help you choose the best lease option for your circumstances.
Featured image by Reid Per Fiskerstrand