Confused About Car Leasing? Read This Quick Guide Now!


Let’s face it; car leasing isn’t exactly a fun and exciting topic to talk about. For some, car leasing is a confusing term that some dealers use to make customers spend money they can’t afford.

Are you thinking of getting a new car soon? If so, you will doubtless be wondering how to pay for it. The most-common way is to borrow some cash to pay for a new car. In the car world, most folks will take out a lease. But what exactly is a car lease? Can it work for you? And what are the alternatives?

By the end of this quick guide to car leasing, you will have superior knowledge on the subject! Your new-found knowledge will also help you to avoid getting ripped off by unscrupulous car dealers.

What is car leasing?

In a nutshell, car leasing is a form of vehicle finance, which is akin to hire purchase in many ways. The way that car leasing works is as follows:

You pay a deposit. A cash deposit is payable, but you can also trade your existing car in for your new one.

You agree to an instalment plan. Lease agreements are usually provided over a 36-month term.

You agree to a mileage limit. Most people agree that they will only drive up to 10,000 miles a year in the car. Excess mileage charges are payable at the end of the term if you don’t stick to your end of the bargain.

At the end of the lease term, you have a few choices. The first is handing the car back to the dealership and paying nothing more. The second is to trade your car in for another one, and you can take out another lease or an alternative finance plan.

If you want to own the car outright, you can pay the optional final payment. It is also known as the “guaranteed minimum future value” and is pre-agreed with you. On some leases, such as contract hire, you don’t have the option to buy your car at the end of the lease.

Is car leasing a good idea?

Let me answer that question with another one. Are you getting a brand new car? If you are, I recommend getting a car lease. With brand new cars, that ugly word “depreciation” rears its head. When you lease a car, you don’t have to worry about depreciation as you don’t own the car.

Even if you wanted to buy a brand new car, and you had the cash to pay for it, I’d still recommend getting a lease first. Many car dealer websites like Listers.co.uk offer leasing deals, such as flexible payment plans.

By the end of the lease, you might change your mind and want another brand new car instead of buying the one you are leasing. It might sound weird, but paying for a brand new car with cash isn’t always the best option!

Image source: NRMA Motoring and Services / Flickr - Licensed for reuse under Creative Commons 2.0

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