Have you considered a car lease?
Oil baron Paul Getty was once quoted as saying that "if it appreciates
you should buy it and if it depreciates you should lease it."
Very few potential purchases lose their value as rapidly as motor cars
with most slumping to around 50 per cent of their original value within
three years. This is why car leasing has become so popular.
How does car leasing work?
Car leasing, also known as contract hire, involves taking control of a
car for a fixed period in which it is yours to drive but is never
actually yours to own. Instead you make fixed payments, typically on a
monthly basis, for a fixed contract period. At the end of that period
you return the car to the leasing company, or in some cases, known as
personal contract purchase, you may also have the option to buy the car
outright.
How much you pay on a car lease is influenced by a number of
factors:
- The retail price of the car - This is the price you would pay to buy
the car outright at the outset of the deal.
- The residual value of the car - This is the estimated value of the car
at the end of the contract period once depreciation, mileage and other
factors are taken into account.
The idea is that you pay the difference between the retail price and the
residual value over the term of the contract. So, the higher the
residual value, the lower your payments should be. Bear in mind that
mileage will also influence your payments - many leasing companies will
ask you to agree to a mileage cap and you may have to pay more if you
exceed this limit.
So what are the benefits of car leasing?
Whether or not car leasing is right for you is really dependent on what
you want as an individual. Here are some potential benefits:
- You never own the car - To some this would be a negative but to others
it`s a huge plus as you never have to worry about selling the car or the
substantial losses of depreciation. Instead, when a leasing period
expires, you can simply take out another lease on a brand new car.
- You can drive a `better` car - For many, luxury cars would be out of
their price range to buy outright. However, as most luxury cars have low
rates of depreciation they are among the most popular cars to lease. So
with car leasing you may be able to drive a car that would typically be
out of your price range, which is why the method is so popular among
small business owners that want a vehicle that projects a certain image.
- Maintenance and taxation included - Many car leasing deals incorporate
the costs of extras such as maintenance and vehicle excise duty. This
means all you have to worry about is car insurance and fuelling
costs.
- No huge costs upfront - With most car purchases you will be asked to
pay a lump sum initially before your monthly payments begin. However,
with car leasing there are no huge costs to pay upfront.
- Fixed cost motoring - You know exactly what you have to pay every
month and payments should be substantially cheaper than with a car loan.
Is there anything else to bear in mind?
Remember when taking out a car leasing agreement the vehicle is never
yours to own and this means that you will need comprehensive car
insurance - third party cover is not sufficient. So use a comparison website to search for car insurance quotes by clicking the Go Compare logo in the right column.
MANUFACTURERS
ATHENA VEHICLE SOLUTIONS
