It’s time to start thinking about returning the lease car that has served you so valiantly over the years - time flies, we know.
But, how does it actually work?
In this article, we’ll cover everything you need to know about returning your lease car at the end of your contract. We’ll look at everything from the collection and inspection process, to the potential damage and excess mileage charges you may face.
What happens at the end of a car lease?
At the end of your contract, your leased vehicle will most likely be returned to the finance company. The return process will vary depending on the finance company, but the general rule of thumb is that the lender will contact you four months prior to the end of the contract to discuss your options at the end of the lease.
When the lender gets in touch, they’ll give you the opportunity of signing up to a new lease deal, although you can just arrange to hand the car back if that’s your preferred option.
When it comes to the end of your lease, what you decide to do with your vehicle can also depend on the type of contract you signed up to at the start of your leasing term.
In terms of business leasing, there are four options:
- Business Contract Hire - The car is returned to the finance company and you are free to lease a new car.
- Contract Purchase - At the end of the contract, the business has the option to buy the vehicle at an agreed price, or return it to the finance company.
- Finance Lease - The balloon payment has to be paid and the vehicle must be sold to a third party.
- Lease-Purchase - A final payment at the end of the contract means the car is left to you and/or your business.
With regards to Personal Leasing there are three options:
- Personal Contract Hire - The car is returned to the finance company and you are free to lease a new car.
- Personal Contract Purchase - At the end of the contract, you have the option to buy the vehicle at an agreed price, or return it to the finance company.
- Personal Lease Purchase - A final payment at the end of the contract means the car is left to you.
The Collection Process
It’s best to organise the collection of your lease car well in advance, so you’ve got plenty of time to gather all the relevant documents and get any potential repairs fixed yourself before the car is inspected.
You should be able to arrange the collection of your vehicle when the leasing company initially gets in touch to discuss your options for the end of your lease.
If the car is being returned to the finance company, collection depends on the funder. However, generally speaking, for contract hire, personal contract hire, contract purchase or personal contract purchase agreements, the finance company will normally collect your vehicle at the end of the contract unless you decide to buy the vehicle.
If you’ve decided to take out another lease, it may be possible to have your new car delivered at the same time as your old car is being collected. However, this depends on how much notice you’ve given the lender.
When they come to collect your vehicle, the finance company will want to see any relevant documents such as the car’s service history.
Ensuring that your vehicle is in tip-top shape before collection and inspection is crucial to avoiding any hefty damage charges. Whilst that car scratch repair cost might be annoying at the time, it could result in harsher lease car return charges.
The British Vehicle Rental and Leasing Association (BVRLA) recommend that you inspect your vehicle for any damage 10-12 weeks prior to the end of your lease. This should give you enough time to schedule any necessary repairs in plenty of time.
It’s probably a wise idea to follow this advice as vehicle inspectors use the BVRLA’s 24-page Fair Wear and Tear Guide to determine what constitutes a reasonable amount of damage on a leased vehicle.
The BVRLA Fair Wear and Tear Guide is the industry standard for all leased vehicles in the UK. We’ll look into Fair Wear and Tear in a little more detail, but if you’d like to have a look at our comprehensive guide on Fair Wear and Tear, be our guest.
What to look out for:
- Inspect the exterior of the car - Start by walking around the car and check every panel meticulously for any scratches or dents. Examine the roof, doors, bonnet and body of the car for any damage.
- Inspect the finer details - Next, take a look at the windows, mirrors, headlights and lamps for any chips, cracks or holes. Make sure to check the wheels, tyres and trims for any significant scratches or damage.
- Inspect the interior - Check the inside of the vehicle for any burns, stains, odours or tears around the cabin. Make sure to check that all the controls and functionalities are in working order before the vehicle is collected.
- Funders' guidance on Fair Wear and Tear - Make sure you are within the funders’ guidelines to avoid any penalty charges at the end of the lease.
If you put a private plate on the financed car, make sure you fill out the appropriate paperwork to get your plate back.
When it comes to collection day, the Collection Agent will analyse the vehicle and record the condition and mileage of the car on a Vehicle Condition Form. You will then sign this form and receive a copy of the form for your own personal record.
As you’d probably assume, the vehicle must be left in good condition and be ready for its inspection.
Please ensure that you’ve got the appropriate documentation to be handed over too. This includes the vehicle's service history, spare keys and any other relevant equipment.
On the day of collection, the Collection Agent will usually ask for the following:
- Up-to-date service book.
- Full set of vehicle keys.
- Valid MOT certificate (if applicable)
- Vehicle operation manual (if applicable)
- Vehicle V5 Document (if applicable)
Using the BVRLA’S Fair Wear and Tear Guide, your vehicle will be inspected before being returned to the leasing company.
The date of your inspection, will again, depend on your finance house. Some finance houses will send an inspector a week before your car is due to go back, whereas others will inspect it on the day of collection.
If you have the opportunity to get your car checked in advance, don’t hesitate. If there does happen to be any damage to the car, you’ve got a week to shop around and get it fixed for a good price. If you hand your car back on the day of the inspection and there is chargeable damage, you won’t have a say and you’ll just have to wait for the finance house to invoice you the damage charge.
As we have alluded to, Fair Wear and Tear is the natural deterioration of a vehicle as a result of day-to-day use. However, if your vehicle’s inspection has revealed any damage caused by an accident, negligent behaviour or poor treatment, you will be accountable for any excess damage that is found outside of fair wear and tear, and subsequently, be charged.
If you’re in any doubt about the condition of the car, it’s not a bad idea to get in touch with the finance company before the vehicle is inspected to discuss any potential issues...or get the car repaired yourself before returning the car.
Common damage charges that result in customers paying end of contract penalty charges include:
- Scratches over 25mm (relative to vehicle’s age and mileage).
- Scratches under 25mm (where primer and metal are showing).
- Missing keys.
- Accidental damage and dents.
- Damaged or stained interior.
- Missing documentation.
- Missed services.
- Wheel damage due to kerbing.
- Windscreen chips.
If you’ve gone over the agreed mileage allowance that was set out at the start of your contract, you’re liable to additional charges from your leasing company for every mile that you’ve exceeded your allowance.
These excess mileage charges are usually calculated on a per-mile basis that can range from anywhere between 4p and 70p - the exact charge will be detailed in your lease contract.
Extending my Lease Contract
If you’ve developed an unbreakable bond with your lease vehicle, there may be a possibility for you to extend your contract.
Speak to your finance company as soon as possible and ask about your options. Some companies are more flexible than others, but the sooner you get in contact, the better your chances.