If you visit a dealership in the UK these days, there is a very fair chance that instead of having the full price of the car pasted across the windscreen, instead they have the monthly payments. Just £200 per month and you can a sporty little convertible, you do a quick calculation – “that’s just £45 per week!” you can cover that sort of money, you are tempted to wander in and sign up right now.
But you should never enter a lease contract on impulse. Never ever!
Deals like the one above are designed to tempt you into the showroom, the chances are that once you are in there and been collared by a salesman and they will sound even more tempting!
The first thing you should remember about leasing a car is that you are entering into a contract for a period of years. Quite rightly, they don’t easily let you walk away from it without financial penalty. Don’t even think about getting a lease car if you are likely to want to change before the end of the lease. All too often people get a nice little two door car only to find that a baby is on the way and they need something with a bit more room and a couple more doors. Make sure your job is secure, because if your financial circumstances change, your lease car could be another millstone around your neck! The same goes for interest rates going up and you finding that you need to make cutbacks to cover your mortgage payments. In short, it’s a big commitment, possibly more of a commitment than actually buying the car because with a lease, you have no equity. So have a long hard think and ensure that leasing is right for you.
Next you need to look at the deal being offered. Does that price include VAT? Are there arrangement fees or other charges? How much is the deposit? Add all this up and compare to other deals out there. Compare the cost to the cost of buying, hire purchase or other leasing option over different time periods.
The chances are that the deal on offer is based on a car doing 10,000 miles per year. For most people this just isn’t enough! The generally accepted average mileage for cars as used by the motor trade is around 12,000 miles per year, but more detailed surveys indicate that the average may be more like 15,000mpa. If you are able to calculate how much mileage allowance you are going to need, and negotiate your monthly payments based on this, you may find that you are paying considerably more than the deal that first tempted you. If you just avoid the issue and run over your allowance you will find yourself paying excess mileage penalties at the end of your contract which could run into thousands of pounds.
Another mistake that some people make is neglecting to budget for insurance costs. Many people decide that the low monthly payments mean they can trade up to a car that is big and sporty and don’t allow for the fact that they are likely to end up paying much higher premiums.
In conclusion, before you sign on the dotted line, research every aspect of leasing — make sure you know exactly how it works. Review your situation now and in the future, make sure you are going for a car which is going to be big enough and make sure you are going to be able to afford it, not just now, but also in three years time. Calculate your annual mileage and ensure that your deal allows you this.Dig deep into the deal you are being offered and look for any hidden costs, and add these to the expenses that having this car will bring, such as insurance, tax, fuel and servicing. Ensure you know every penny that it will cost you and get value you’re your money.
We would strongly recommend budgeting for an minor damage fund. All cars incur damage during their lifetime, and with a lease car you will be charged for dents scuffs and scratches which are deemed to be beyond ‘fair wear and tear’. Putting aside £20 per month over the period of a 3 year lease will mean that will have the money to either pay the recharges, or better still pay to have the work carried out yourself as you go along (if you do it this way, you tend to take more care of your car, and the repairs usually work out cheaper than the recharges.) Any money you have left over can go towards the deposit on your next car.
