Car leasing – what’s involved?
If you can’t afford to buy a brand-new car or simply don’t want to spend all your savings on one, you could consider leasing a vehicle as an option. Leasing can be cost-effective and relatively hassle-free and there are lots of options to choose from as well as plenty of things to be aware of when searching for the best deal.
Car leasing explained
Leasing a vehicle can be compared to renting a house. You sign a contract and pay a monthly fee for the vehicle over a predetermined period. At the end of the contract, you simply hand the vehicle back to the leasing company. Car leasing is a long-term agreement, rather than car hire where you rent a vehicle for a short period. Leasing sometimes includes an agreement where you can buy the car over a period of time if you so wish.
Leasing can be a really good idea, but remember that you don’t own the car at the end of the agreement unless that option is included under the agreement. Some deals also come with mileage restrictions.
How does car leasing work?
You choose a car from a range of models and manufacturers; the more expensive the car, the higher your monthly payments will be. Cars which hold their value the best will cost the dealer less over time and will thus be cheaper to lease each month, whereas those that lose value more quickly will have correspondingly higher leasing fees.
You will agree a contract which stipulates the duration of the lease period, the mileage you may drive annually, and the monthly fee including maintenance if you require it. The mileage element is important as the higher the mileage, the less the car is worth to the dealer. If you exceed the mileage limit, the dealer will levy a charge for every mile extra that you drive.
If you lease a car for your business, you can reclaim VAT at 100% if the car is purely for business use or 50% if it is also to be used privately. You can also claim tax allowance on the leasing payments.
Be aware though that if you do high mileage during the course of your work, you will still have to pay the extra which may mean that leasing is not the best option.
So, leasing can be a really good option depending on your circumstances and requirements but think carefully and weigh up all the options before you sign on the dotted line.