Car lease deals
If you want to get a car, and pay monthly for it, you have several options. If you’re not fussed about owning the car, and don’t want to pay a huge amount upfront, leasing, rather than buying, could be the best option for you, and you might be able to get a great deal.
With car leasing, you pay a deposit – typically a few months’ rental costs in advance – and pay a monthly amount for a set period of time to lease the car. A car lease deal usually lasts between two and four years. You never own the car, and at the end, you give it back.
There are car lease deals out there that start from around £100 a month, so it can be an affordable way to have a car.
You don’t get any equity in the car to use it as a part-exchange against your next car – it’s basically like hiring a car for a long period of time, but you get what you want and don’t get a bashed-in, basic-spec, uncomfortable thing like when you’re on holiday.
Sometimes when you lease a car, road tax, breakdown cover, and servicing and maintenance costs are included in the payments you make, which is a positive for some people.
However, there will also be a mileage limit. This will affect how much you pay each month i.e. a 5,000-mile annual limit will likely be much cheaper than a 10,000-mile deal. And if you go over the limit you’ve agreed, you will have to pay extra charges, which can be quite a lot.
Car leasing is different to PCP (Personal Contract Plan). PCP is the most popular car finance. You pay an initial deposit, followed by lower monthly instalments for the remainder of the term, to pay of a proportion of the loan amount. At the end, you have to option to pay a large final payment to clear the remaining balance and own the car outright, or hand it back, or exchange it for another car.
But back to car leasing. There are quite a few pros and cons to car lease deals.
Pros of car leasing:
Monthly costs are lower than with other types of car finance, and you don’t have to worry about the depreciation of the car.
With most car lease deals, you can drive around in a brand-new car, every two or three years.
The amount of money you pay every month is usually fixed, so you know how much it’s going to cost you over the contract period.
Some car lease agreements include things like road tax, breakdown cover, servicing and maintenance.
You can sometimes extend the lease deal after the contract is up, and pay a lower monthly price as it’s now an older car.
Cons of car leasing:
If you don’t like the car after a few months, you are stuck with it until the contract runs out, unless you pay an exit fee.
You might need a relatively large amount of cash for the initial deposit.
You will never own the car – you’re simply leasing it from the company and have to give it back at the end of the contract.
If you go over your mileage limit, you’re likely to get charged extra. Make sure you know what the per-mile cost will be if you’re expecting to exceed the limit.
Like with renting a house, if you cause any damage, you will have to pay for this at the end of the contract.
Don’t look at this as an investment; you won’t have anything to show for your money at the end of the contract.
If you can’t keep up with the payments, the car will be taken away.