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When to lease a car

When buying a car, you have to pay the full price for a vehicle with a constantly decreasing value. To get the best return from your initial outlay, you need to run that car for its full lifespan. You can end up driving an older car with higher maintenance costs, less advanced features and with a lower specification. A car’s performance generally drops over its lifetime also unless it’s been maintained to the highest standards, which comes with additional costs.

Car leasing can be a smart way to cover the costs of motoring.

Car leasing can be a smart way to cover the costs of motoring.

Car leasing can be a smart way to cover the costs of motoring.

When you lease a car, it’s like renting a house or flat in that you only pay for the part of its life you use and at the end you hand back the keys to the leasing company. Unlike hiring a car where you rent it for a fixed period (e.g. a day, week or fortnight), contract hire and leasing is like long-term renting and often includes the option to buy the vehicle over time.

One major advantage of leasing is that you don’t need to worry about the car losing value as it ages – because you don’t own it. This also means you don’t have to go through the hassle of selling it once you’re finished with the car, as you can simply give it back at the end of the agreed term.

Leasing means you can be driving a new model car every couple of years if you like meaning that you’ll never have to worry about the car being out of warranty. Some car leasing deals have the option to pay extra each month for maintenance costs, avoiding the need to find the money to repair it if there any problems outside the scope of the warranty.

The downside of car leasing is that you don’t own the car at the end of the agreement period unless there is the option to buy it and you decide to do so. In addition, car leasing deals often also come with mileage restrictions – charging you by the mile if you exceed those restrictions and this can be costly if you’re travel long distances above the average of 12,000 miles per year.

The main factors to keep in mind when considering leasing a car are:

  • The more expensive the vehicle you choose to lease, the higher the monthly payments are likely to be.
  • Depreciation is key, as cars which hold their value best will be cost the dealer less over time and therefore cost less to lease each month. Cars which lose the most value have the highest monthly leasing fees, as the dealer will want to recoup their depreciating values.
  • A contract will outline how long you want to lease the car for, how many miles you’ll drive each year and how much you are expected to pay each month for the lease and, if required, maintenance.
  • The annual mileage part is key as the more miles a car does, the more its value falls. Estimating an annual mileage gives the dealer an indication of how much the car will depreciate over the lease period.
  • The dealer will charge you a set fee, detailed in your contract, for every mile you drive above the agreed limits.
  • New leases require a deposit which is equivalent to two or three months’ worth of payments and many lease agreements will charge an additional fee if you choose to get out of the arrangement before the end of the contracted term.

As with any financial agreement it’s highly recommended that you shop around and looking out for car lease deals, as these can often save you a lot of money.

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