It’s no secret that we’re big fans of car leasing. I mean, we built a whole comparison site for it!
However, I'm very aware that not everyone is quite as passionate as we are. In fact, from chatting with folk on the street, it appears that loads of folk haven't even heard of leasing.
Well, I’m here to fix that.
In this article, I'll give you a quick definition then explain the common pros and cons of leasing. By the end, you should have a good grasp on why leasing is (or isn’t) a good fit for your circumstances.
What is Leasing?
Hands up if you don’t actually know what leasing is? Okay, all you people, don’t worry. I’ve got you covered.
Here’s a super quick explanation that’ll have you blagging your way through dinner party debates in no time.
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. You make an initial payment then regular monthly payments to cover the depreciation of the vehicle. At the end of the deal, you return the car to the broker and they sell it on.
It’s basically long-term rental but at a much lower cost as the broker is leasing the vehicle for an extended period of time and the payments only have to cover the depreciation of the car.
Car Leasing Cons
Not to kick things off on a downer but I’m going to start with the main drawbacks to car leasing. Not everything will apply to you right now but it’s important you appreciate why leasing might not be for you.
The headline con for leasing is ownership. With car leasing, you never own your car and never will.
Yes, you drive it every single day and lovingly wash it at the weekends but that doesn’t change anything. During the leasing period, ownership stays with the finance company.
Like I mentioned before, you are basically renting the vehicle from the finance company and, like any other rented vehicle, you don’t own it.
If you’re okay with the idea of driving a (technically) rented vehicle, leasing could be a good option for you.
However, if you like actually owning your cars, it might be worthwhile financing your car another way.
Fixed Contract Length
Just like property leases, car leases are fixed for a set length of time — usually 24, 36 or 48 months. And like property leases, car leases are usually pretty tricky to get out of
You might think that doesn’t really matter when you take out the lease but it’s worth thinking about what you’d do if you got a job abroad or really hated your car.
Unfortunately, I don’t have any one-size-fits-all advice for getting out of your contract. Sometimes you can 'swap' your lease to someone else and have them take over the remaining payments and other times you can pay certain penalties to exit early.
If you can exit your lease and how you will exit your lease is so reliant on your personal circumstance it's difficult to say any more than this.
Wear and Tear
Even the most careful drivers experience a bit of wear and tear on their cars. Little dings on the bodywork, scratches on the alloys and wear on the seat fabric — that sort of thing.
Finance companies expect cars to pick up a bit of wear and tear through the leasing period and work this into their depreciation calculations.
The problems start when any damage is more than ‘normal’ wear and tear and decreases the value of the car more than the finance company expected.
Say you misjudge a bollard and get long scrapes down the side bodywork. That sort of thing has a real effect on the sale price of the car and needs to be repaired to return the car to a saleable condition.
And guess who has to pay for it? Yep, you do.
To get a feel for what counts as wear and tear, check out the BVRLA’s guide here.
This is the same as the wear and tear point, really. If you tell your finance company that you’re only going to drive 10,000 miles a year for two years, they’ll calculate the value of a two-year-old car with 20,000 miles on the clock.
If, at the end of those two years, you’ve actually done 50,000 miles, that car is suddenly worth less money and the finance company is out of pocket.
Someone has to make up the difference and that someone (again) is you.
Ignoring for one moment whether you should ‘improve’ your Volkswagen Golf with a massive massive aftermarket spoiler, underlighting and bin-sized exhaust — you definitely shouldn’t! — let’s talk about modifying leased cars.
If you’re into modifying your cars, I’ve got some bad news. Finance companies typically don’t like you drilling holes in their cars. (And remember that with a leased car it does belong to them.)
While you can get permission for some modifications (tinted windows are the most common), most requests get bounced back.
Car Leasing Pros
Okay, enough of all that negative stuff. It’s time to focus on the positive and explain why we love car leasing so much.
Leased cars are brand new motors with a full manufacturer warranty. If your radiator bursts, your alternator packs up or your electrics malfunction, it’s super comforting to know that the manufacturer has you covered.
A quick insider tip for you. While most manufacturer warranties run to three years, leasing customers are often offered a four-year leasing deal. Try and avoid these as you’re unprotected for that last year and could face a hefty repair bill if anything goes wrong.
This is actually one of my favourite things about leasing a car — even if it’s something people don’t like to talk about.
With car leasing, you can usually afford a higher-spec, higher-priced and better-equipped car than you could if you were buying it.
If driving a nice car is important to you, leasing lets you drive one without actually shelling out for one — and that’s a huge plus!
Compared to other forms of vehicle finance, leasing deals are super simple. You make your payments, you drive your car and at the end of the leasing period you go give the car back and go your separate ways.
With leasing deals, 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.
The car isn’t actually yours so you don’t have to worry about it once the leasing period has run out.
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!
And if you've already decided you want to go ahead and lease your next car, jump over to our comparison engine to find your perfect next car at the perfect price.