It’s no secret that we’re big fans of car leasing. I mean, we built a whole leasing comparison site!
However, I know that not everyone is quite as passionate as we are. (Shame on you.) In fact, a lot of people we talk to haven’t even heard of leasing.
Well, I’m here to fix that.
In this article, we're going to take a whistlestop tour through what leasing is, its advantages and disadvantages. By the end, you should have a good grasp on why leasing is (or isn’t) a good fit for you.
Let's get started!
What is Leasing?
Before we jump into pros, cons and other ding dongs, we’d better take a minute to explain what leasing actually is.
So, personal/business contract hire (usually just called car leasing) is an agreement between you and a dealer that allows you to drive a brand new car for a set period of time.
In exchange, you pay an initial rental payment (usually three, six, nine or twelve times the monthly rental) and then pay regular monthly payments for the duration of the agreement. At the end of the lease, you return the car to the dealer and you and the broker go your separate ways.
When you break it down, car leasing is essentially long-term rental.
Let’s start with the positive stuff and talk about why you should consider leasing for your next car.
We'll look at the manufacturer's warranty, access to higher-spec cars and financial simplicity.
Also, remember that this isn't an exhaustive list. If we tried to explain every single advantage, we'd be here until next summer!
Leased cars are brand new motors that have literally just rolled out of the factory. And as a brand new motor, they come with a brand new multi-year manufacturer warranty.
Engine goes kaput and leaves you stranded on the motorway? Get your leasing broker on the phone and tell them to fix it. If you're within the manufacturer's warranty, it really is as simple as that.
A standard warranty will (usually) run to about three years, however, they can be longer or shorter depending on how confident the company is in their handiwork. Always be sure to ask how long the warranty is to avoid nasty surprises later down the line.
On that note, watch out for four-year leasing deals as most cars come with a three-year warranty that'll leave you unprotected in your final year, meaning you have to pay for repairs if anything goes wrong.
Right, this is one of the things that no one really talks about but it’s actually one of the best things about leasing.
With leasing, you can usually afford a higher-spec, higher-priced and better-equipped vehicle than you might otherwise have been able to buy.
If you're buying it new, a Range Rover Evoque will cost, at least, £30,000. That's a lot of money drop on a car. If you're paying it off on finance, say using a personal loan and repaying it over five years you're probably looking at, at least, £600 per month.
If you go with leasing, however, you could drive the exact same car at a much cheaper monthly payment.
The reality is that leasing brings premium cars into reach for a huge swathe of the public, making it possible to drive nice cars without emptying your wallet.
If driving a nice car is important to you, leasing is definitely something you should consider.
Leasing deals are simple. You pay a set amount of money every month, drive your leased car as if it were yours and at the end of your contract you give it back.
With leasing, there’s no worrying about resale value, no writing Autotrader listings and no waiting for prospective buyers to turn up only for them to cancel on you half an hour after they were due to arrive.
Since the car isn’t actually yours, you don’t have to worry about it once the leasing period has run out. (Well, so long as you've kept to the T&Cs that is!)
The finance company calculates your payments before you begin your leasing deal so you know exactly what you have to pay and for how long and that makes it super easy to budget for.
Okay, enough of the advantages. Let's dig into the nitty-gritty of leasing and talk about why it might not be the right choice for you.
We'll look at concerns over ownership, contracts, damage, mileage and modifications.
So, if any of that is important to you, read on!
The headline disadvantage is that you will never own a leased car. It’s not yours on the first day, it’s not yours on the last day and it’s not yours any time in between.
While that seems simple, it's actually pretty easy to forget that the finance company owns the car.
When you drive to work in your car every single day, run your kids to school in your car every single day and nip over to the gym in your car (almost) every single day, that car can feel like it’s your car.
Well, it’s not.
And come the end of your leasing deal, you've got to hand it back to the broker and walk away. If you’re okay with that, leasing could be a good option for you. However, if you like actually owning stuff, you might want to look elsewhere.
As a quick footnote, leasing brokers will sometimes agree to sell cars on at the end of the leasing deal. However, you can't rely on that being an option.
Fixed Contract Length
Like most contracts, it’s tricky to get out of a leasing deal midway through without having to pay some penalties.
You might think that doesn’t really matter when you take out the lease but think about what you’d do if you suddenly took a new job in a different country or needed to cut back your monthly expenses.
What penalties you have to pay will vary depending on your specific contract so it’s really important to carefully read through the terms and conditions — and I mean actually read it — before you sign on the dotted line.
Wear and Tear
Cars will naturally pick up a bit of wear and tear as you use them. Little dings in the bodywork, slight wear on the seats, small scrapes on the interior — that sort of thing. According to the industry body, the BVLRA, wear and tear:
occurs when normal usage causes deterioration to a vehicle. It is not to be confused with damage which occurs as a result of a specific event or series of events such as impact, inappropriate stowing of items, harsh-treatment, negligent acts or omissions.
Finance companies expect a bit of wear and tear and include it in their fancy calculations for working out the depreciation of a car over time.
The problems come when damage on a car exceeds fair wear and tear and starts to impact the value of the car.
Say you misjudge a bollard and leave huge scrapes all the way down the side bodywork. That big scrape needs to be repaired to return the car to a saleable condition.
And guess who has to pay for it? Yep, you.
To get a feel for what counts as wear and tear, check out the BVRLA’s guide here.
Same as the wear and tear disadvantage, really. If you tell your finance company that you’re only going to drive 10,000 a year and you actually drive 50,000, the car is suddenly worth a lot less.
Someone has to make up the difference and that someone is you.
Since excess mileage fees are usually quoted per mile, they tend to look really small — 5p per mile, 7.2p pence per mile and so on — but they can add up quickly.
If your finance company is charging 7.2p per mile and you exceed your mileage by 6,000 miles, you're looking at an extra £432 charge at the end of your lease.
Okay, ignoring for one moment whether you should stick a massive spoiler on the back of your Volkswagen Golf (you shouldn’t), let’s talk about modifications.
Remember how you never actually own a leased car? Well, if you suddenly start drilling holes in the bodywork and bolting on big rear wings, your finance company is going to be mightily pissed off.
If you want to modify your car, always ask permission first. And be prepared for them to say no.
What Do You Think?
So, what do you think of leasing? A great idea that more people should be taking advantage of or something else?
Jump into the comments and let us know!