Think of car leasing like renting a home. Remember that time you had £100 knocked off your deposit because you didn't hoover every spec of dust off of the skirting boards? Or that time you were charged £50 for stealing (ahem, re-homing) that nice casserole dish you thought the landlord wouldn't miss? The cupboard was full of so much random kitchen equipment anyway! So pernickety. When your home lease comes to an end, you're almost guaranteed to be rushing around to get it in ship-shape so you're not hit with any extra charges.
Car leasing is somewhat similar. When your business or personal contract hire comes to an end, you need to give it a good scrub down before you hand it back. If you return it covered in scuffs and scratches or looking like you've never run a hoover through it, you'll be landed with some pretty sizeable return charges.
Generally, your leasing broker will say that your lease car needs to be in "good condition" when you hand it back. But what does that actually mean? In this blog we're going to look at why you have to pay these charges, what you might be charged for, how to avoid being charged, and what to do if you want to dispute charges.
Why do you have to pay lease car return charges?
To understand why you might need to pay lease car return charges, you need to understand how leasing brokers make their money.
A leasing broker buys a brand new car, they lease it out to you who pays up the cost of depreciation, and then they usually sell them on afterwards for a profit.
So, if you try and hand back a car with chunks of metalwork gauged out or a nice big crack across the middle of the windscreen, that means they won't see as big a return on their investment as calculated. You're the one who's done the damage, so it's only right that you should be the one to cover the cost.
Your monthly lease payments are calculated by predicting the value of the car by the time your contract comes to an end. This predicted future value is based on your car staying within the agreed annual mileage limit, having a full manufacturer service history, and generally being in very good nick.
If you don't abide by your lease company's guidelines, the value of your leased car will not match predictions, so the difference will come out of your pocket. Occasionally, you can dispute the charges (which we'll come to later) but normally they're pretty rigid but fair.
The leasing company doesn't always use the money they've charged you to pay to fix the problem, but use it more as compensation to cover the money that they're losing.
What type of lease car return charges are there?
There are a few categories which your return charges may fall under. To keep you right, we've outlined them here:
Excess mileage charges
At the beginning of your lease, you'll agree on an annual mileage limit. Your monthly payments increase the higher your limit since the value of the car decreases the more miles it racks up. So, if you exceed your limit, you have to pay an excess mileage charge to recoup some of this lost value. As tempting as it is to keep your monthly payments down by reducing your annual mileage, if you can't stick to it, you'll end up splashing out much more money at the end of the lease.
The charge per extra mile differs from finance company to finance company. For some, it can be as low as 3p per mile but for some, it can be 70p. It might not seem that much at first glance, but if you go 1000 over a year, at 70p a mile, that's £2100 for a standard 3 year lease! You would have been better paying that little extra every month for a more flexible mileage limit instead.
Servicing with the wrong dealer (or not at all!)
The predicted final value of your car is also based on it having a full manufacturer service history. You'll be told upfront whether you're expected to have your car regularly serviced with a specific franchised dealership. If you try and get it serviced with an independent garage, or fail to get it serviced at all, your leasing company won't be too happy!
Servicing your car makes sure it's in tip-top condition for the road and helps to lengthen its life (and, in turn, its value). The best tune-up can be done by the manufacturer themselves, which is why your leasing company will ask you to head to them specifically.
So, if you catch yourself looking at the car service prices and thinking to yourself, "Whoa, that's pricey. My mate can do it for half the price at his garage, I'll just take it to him", just stop right there. That saved money will be a distant memory when you're hit with your lease car return charge for improper servicing.
More than wear and tear
Leasing brokers will generally turn a blind eye to normal wear and tear. It's important, however, that you know what the definition of wear and tear is. Your broker will usually have specific guidelines, based on the industry-standard BVRLA fair wear and tear guidelines.
It is inevitable over the course of a few years that your car will sustain scuffs, scratches and minor chips. Generally, very small areas of damage that are consistent with ordinary daily use are acceptable. If the damage is representative of continuous harsh treatment, you can expect to fork out some serious cash-ola.
Small scuffs on the alloy wheels and minute chips in the windscreen that don't affect the driver's line of sight are often brushed to the side. However, if you've allowed the body to become corroded and you've got scratches in the paintwork that go through to the bare metal, then you've got some problems.
It's often better to get any minor scratch and scuff repairs fixed anyway for peace of mind because you're likely to be charged over and above for them otherwise. That car scratch repair cost is annoying at the time, but not as annoying as a hefty return charge when you're returning a lease car!
Poor repair work
Don't try and do these repairs yourself though!
Even if you've had repairs done to your car, if they weren't done to a professional standard, i.e. you did them yourself or your pal gave you mates rates, then your leasing company might add on an extra charge. Essentially, you'll be forking out for the repairs twice.
You shouldn't wait until your car service to do all your maintenance tasks in a one-er. Modern cars are kitted out with all sorts of fancy technology that helps it communicate to you when you need to take care of it. If you have any issues with your lights, fluid levels, fuel, and more, your dashboard warning lights will let you know.
As you come close to the end of your lease, you might feel the urge to simply ignore these lights, hoping that someone else will deal with the problem later on. If your leasing company picks up your car with the dashboard looking like a string of fairy lights, they'll charge you for it.
When you consider the ease and cost of topping up your windscreen washer fluid versus the premium the broker will charge you for not doing it, you'll seriously regret not doing it yourself when your final bill comes around.
Leaving it a mess!
After buffing scratched alloys, touching up paintwork, and appeasing every warning light that shot up on your dashboard, the last thing you want to do is leave your car a disgusting mess inside. Pet hair, kid's biscuits crumbs, last Friday night's fish supper wrapper - it's all got to go.
If you leave your car a filthy mess, with unsightly stains and odours you just can't put your finger on, expect some hefty charges. Who would want to buy a car with sticky patches on the seats and that lovely wet dog smell?
How can I avoid lease car return charges?
You can avoid lease car return charges by being proactive throughout your lease and in the last stages of the contract.
Throughout the Lease
Keeping on top of things from the outset of your lease will help you to pick up on issues early, which will keep your return charges low. Here are some things you can do to keep yourself right:
- Clean the interior and exterior regularly (every fortnight or month). The frequency of cleaning depends on the area you live in. If you live in an area near salty seas, you'll need to clean more often to prevent rust and corrosion!
- Get your car regularly serviced at the right dealership.
- React to warning lights as soon as possible. Keep your fluid levels topped up and filters nice and clean to prevent further issues and last minute panics come pick up day!
- Stick to your mileage or ask your broker about the possibility of extending your mileage limit. Some leasing companies will up your monthly payments in exchange for an increased mileage limit.
- Have repairs done professionally and as soon as possible. If you're not trained, don't try and put on your mechanic's hat and do repairs yourself to save money. Your car is technically someone's else's property so you need to look after it well. Get necessary repairs done promptly at an approved garage.
The End of the Lease
The final few weeks of your lease are critical, giving you the opportunity to identify issues you didn't catch earlier on in your lease.
- Get your hands on the fair wear and tear guidelines so you know what look for to avoid the end-of-lease charges. Ask your leasing company for a copy if you don't already have one.
- As the end of the contract draws closer, you'll be notified by your broker. Around the final 10 or 12 week mark, you should start looking closely at your car for issues. This will give you plenty of time to organise repairs should you need them.
- Wash and thoroughly dry your car and get it in a good light to assess any damage:
- Check every panel of the bodywork closely for scratches and scuffs, including the roof, bonnet and doors.
- Check the tyres (and the spare wheel). Inspect the wheel trims, tread, spokes, and sidewalls for problems. They need to meet UK legal requirements.
- Check the lamps, lenses, windows, and mirrors for chips or cracks.
- Check the interior upholstery and carpets for stains, fraying and bad smells.
- Inspect all electronic devices inside the car. Clear all your personal data off the machines - the next owner doesn't need to have your home address conveniently stored on the sat nav.
- Gather all your equipment and documents and make sure they're up-to-date. You'll need a fully stamped service book, a valid MOT certificate, your operation manual, full set of vehicle keys, spare keys, locking wheel nut, and your vehicle V5 document.
How do I dispute damage charges?
On the handover date, the leasing company rep will do a very quick assessment of your car and ask you to sign to confirm the condition the car was left in. If there are noticeable 10-inch scratches along the doors, you'll have to agree that they were there already upfront.
The proper assessment will take place after they've picked up the car. You'll then receive your list of extra return charges if you have any.
If you're not happy with the charges, you can pay for an independent qualified engineer to look over the evidence. This engineer will be agreed upon by you and the leasing company. If they agree with you, you'll get out of all of the relevant charges.
Contract winding up soon?
If your lease is coming to an end soon, these tips will help you avoid racking up extortionate lease car return charges!
While you're scrubbing your current car until it's gleaming, why not have a think about what your next car will look like? LeaseFetcher have thousands of leasing deals from the UK's leading brokers - have a browse and pick out your next set of wheels!