Car Leasing – The Facts
When you need a car but can’t afford the large up-front costs of a new vehicle, a dodgy second hand model may seem the only option; instead, consider leasing a new car which is safe and reliable. Put simply, leasing is ‘renting’ a car from a leasing company; you’ll only need to pay small instalments each month to have the car as your own for an agreed period of time. Here are some important facts about car leasing to help you understand whether it’s right for you:
There are different types of car leasing
There are a few different forms of car lease; the first option is a closed-end lease where you are able to return your vehicle at the end of the rental term and walk away. With this option, there may be certain fees if you have exceeded the maximum mileage allowed within your lease contract.
The second option is an open-end lease is great for business use, at the end of the lease the renter pays the difference in residual and market value of the car.
Finally, you can buy out the car at the residual value if you wish. The final cost will be clearly detailed in your contract if this is the sort of lease you require.
The advantages of car leasing
The biggest advantage of leasing a car has to be that leasing involves minimal upfront fees. You are most likely to only need to pay a security deposit and a one-month lease payment. Purchasing a car outright of course requires a lot more up-front cash, which in these times of financial hardship, is hard to come by.
Lease payments are usually a lot cheaper than the cost of monthly car loan payments. You are not paying for the car in full over the length of your contract but instead paying the cost of borrowing it.
The disadvantages of car leasing
Though the disadvantages are far outweighed by positives, there are a couple of things to remember when leasing. You will need to comply with the terms and conditions of the leasing company, and if you don’t you could face large penalty charges. These restrictions could include mileage allowances. There may be costs to pay when you need to finish you contract early in unforeseen circumstances – like when your vehicle is damaged in an accident or stolen. Make sure you are aware of all the policies you agree to when beginning your lease, as with any on-going contract, the small print could prove to be important in the future.
Interest rates may also be a concern for those wishing to lease a vehicle. Although monthly payments are small, it may figure out more cost effective to save monthly for the car that you are hiring. This all depends on the vehicle, if you are renting a premium vehicle that would otherwise be out of your budget, interest rates are not as important as the huge advantage of being able to drive a car away today!