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Car leasing plans can save you money when you order your next car, however they may not suit everybody, as I explain in this article.
What is car leasing?
Car leasing plans are very similar to rental schemes. You pay an initial non refundable payment followed by monthly lease amounts during the term of the lease. You don’t own the car, as you are merely renting it, and you hand it back to the leasing company at the end of the lease.
Possible disadvantages to leasing a car
There are a number of disadvantages to leasing a car, rather than buying it outright or arranging other forms of finance.
- Bad credit history
A car leasing company needs to be confident that you are credit worthy and will meet all the monthly payments throughout the lease. They will run a credit check to assess your credit worthiness. If your credit report shows that you have had credit problems in the past, then it is unlikely that the leasing company will approve your lease application. In that case, you will have to finance your car purchase through other means – possibly with a company that specializes in financing people with poor credit histories. - High mileage users
Leasing companies will offer quotes based on expected annual mileages. As depreciation of a car is based, in part, on its mileage, the more miles you do in it, the greater its depreciation and hence the more a leasing company will charge you. Although you might has estimated that you will only use the car for a certain number of miles during the lease, if your actual mileage is higher than expected, you will be subject to an additional cost when you hand the car back – often 10p per mile. - Children and dogsThe condition of the car at the end of the lease also determines its value so if you return the car in a poor condition, you can expect the leasing company to charge you extra, as you have devalued the car more than expected. Families with young children, or dogs, may not be suited to car leasing schemes as they can cause more than “fair wear and tear” damage to the leased car.
- Optional extras
If you like to personalize your car with a number of optional extras, such as larger wheels, upgraded sound systems or satellite navigation, then leasing a car can present problems. This is because the leasing company will charge you the full cost of the optional items, but then divide this by the number of months of the lease term. So you pay for the options in full, but have to hand them back, as they are part of the car, at the end of the lease. This makes optional extras an expensive luxury when leasing a car.
To summarize
Whilst there are undoubted benefits to leasing, rather than owning, a car, you can see that it may not be the best solution for everybody. Your particular circumstances dictate the best car finance solutions for you, so you should examine your options carefully from a cost and convenience point of view.