The Pros and Cons of Leasing a Car

If you're a business owner, self employed individual or sole consumer on the hunt for a new set of wheels, car leasing could be the answer. Unlike some forms of finance it can provide you with a new set of wheels, without excessive hassle, expense and the depreciation bombshell.

Behind a PCP, one of the most popular forms of car leasing is a PCH, known as BCH when offered to a business, both are pretty much the same with exception of VAT which is charged on a BCH. Essentially both are long-term rental agreements that can enable you to drive away in a car of a higher specification that you might otherwise be able to afford.

However, as with most things in life there are both pros and cons when leasing a car. The most obvious pros being a brand new car and fixed monthly payments among others. Meanwhile the list of cons includes the fact that it is essentially dead money and there's no option to own the vehicle at the end of the agreement.

Any how, without intending to waffle on meaninglessly, filling your brain with gobbledygook in the process, here's a look at the real-life pros and cons in more detail.

The Pros

Fixed Monthly Payments – One of the biggest attractions of PCH is its hassle free fixed monthly payments. By hassle free I am referring to the fact that additional services such as vehicle maintenance, replacement tyres and even roadside assistance can be worked into the deal, giving you a single monthly motoring payment.

Furthermore, Road Tax can be worked into the deal, of course you will still be required to ensure the vehicle has valid insurance cover and there's also the cost of fuel. That said, some manufacturer based deals even come with free insurance, however, this is usually limited to the first year.

Claim Back VAT – If you're a business and choose to take out a Business Contract Hire (BCH) agreement, VAT will be added. However, all is not lost as 50 per cent of this VAT can be claimed back, your account should be able to fill you on details.

Avoid Depreciation – The affects of depreciation can be likened to dropping a wad of cash down a drain with no hope of retrieval. It can literally wipe 60 percent off the value of your shiny new car by the end of year three. However, because PCH doesn't involve car ownership it enables you to quite literally forget all about it and the risk of depreciation and its financial consequences rest firmly with the car leasing company.

Factory Fresh Car – Argh, there's nothing better than the synthetic rubber and plastic aroma of a factory fresh car. You might disagree, but one thing we're bound to agree on is that the idea of driving away in a brand new car with affordable monthly payments is an attractive one.

That's exactly what PCH enables you to do, essentially you're paying for use of the car rather than buying it outright so it could even enable you to choose a higher specification car than you might otherwise have been able to afford. Also, being new, there's a full manufacturers warranty which should means no hidden faults and costly repairs, something it's all to easy to fall foul of with a used vehicle.

Hassle Free Disposal – I'm sure you'll agree, disposing of your old car can be stressful, what with a private sale likely to attract times wasting browsers as well as those who are genuinely interested. Then there's the vast array of online car buying services who have been given some serious stick for their low prices.

However, all that could be a thing of the past. For example, if you were to take out a PCH agreement with Parkway, when it comes to the end you simply drive the car back to the dealership hand over the keys and are free to purchase a new car at either the same location or another dealership.

The Cons

Dead money – As a PCH is essentially a type of rental agreement, albeit a little longer than a standard car rental period, it's essentially dead money. By this I mean you'll never actually own the vehicle and it remains the property of the car leasing company throughout the agreement. This also means that you'll have no vehicle to use as a part exchange when you take out a new vehicle at the end of your current agreement.

Long-term commitment – As with most finance agreements, a PCH involves you being tied in for a period of between one and 5 years. Although you can walk away from the car before the agreement has run its course, it could be rather costly. It's therefore important to ensure you choose the right car from the get go.

Restrictions apply – Car leasing agreements such as a PCH generally come with a whole list of restrictions. The biggest of these is a mileage cap, most are set to between 5,000 and 40,000, but this can be negotiated at inception. Of course, the higher the allowance, the higher the payments.

It's also worth noting the fact that exceeding this mileage cap will result in a cost per mile charge, this often ranges from just 6 pence per mile right up to 50 pence per mile and possibly even more if you were to lease something like an Aston Martin.

In addition, most leasing agreements prohibit you from making vehicle modifications with the exception of non permanent additions such as a tow bar, but even then you may be required to seek written permission.

Upfront payment – When taking a PCH agreement with a car leasing company, the chances are you'll be asked to stump up a deposit or initial payment as it's often referred to. This can equates to between three and six monthly payments and is non refundable.

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At Motor Heads we appreciate every opinion! except SPAM! Comments are moderated, so if you want to link to your motoring site please ensure its relevant to the conversation, otherwise your comment will be removed.

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