THE PROS AND CONS OF LEASING A CAR
Though it might have been relatively unheard of in the past, car leasing has increased in popularity over the years. Personal car leasing allows you to rent a car for a few years for a fixed price, and then hand it back to the leaser at the end. So, if you are looking to get a new car, and you’re not sure if buying the car is the right option for you, here are the pros and cons of leasing a car instead.
1. Lower monthly payments than a loan: Leasing a car often offers lower monthly repayments than buying the same car or paying back a loan. But keep in mind that being caught using a mobile phone whilst driving incurs higher insurance premiums.
2. Ability to drive the latest model: Drivers are able to afford a better model of car than they usually might not be able to afford.
3. Change your car every few years: Not only can you drive the latest model, but you have the option to upgrade to a newer model at the end of your lease, which might be every few years.
4. Low down payment: Leasing agreements have a smaller down payment than purchasing a car, as it acts as a deposit for your monthly payments.
5. Easier to obtain even with a bad credit rating: Car leasing is typically easier to be approved for than a loan to buy a car outright, even if you have a bad credit rating.
6. No need to worry about depreciation: Over time, a car will depreciate in value. When you purchase a car yourself, this means that you will usually sell the car for a lot less than you bought it for once you’re done with it. However, by leasing a car, the depreciation is the responsibility of the leasing company. At the end of the contract, you just return the car with no worries. However, it is important to note that the depreciation value will often be factored into your monthly payments.
7. Can claim as tax deduction if you own a business: If you own a business, you might opt for business contract hire. The main difference between this and personal car leasing is that 50% of the VAT can be reclaimed from business car leasing.
1. Mileage restrictions: Every car lease comes with a maximum number of miles that you can drive per year. If you go over this, you will have to pay an extra fee.
2. Potential extra fees for damage: You might also have to pay extra fees if you return the car damaged. However, leasing companies have to take into account general wear and tear.
3. You don’t own it at the end: At the end of the lease contract, you have to return your car to the company from which you have been leasing it. This is because you will not own the car even after paying to use it every month.
4. Higher insurance: Car insurance for lease cars is typically higher to cover gap insurance.
5. Monthly payments rather than a one-off: Whereas with buying a car you pay one bulk sum and you’re done, with car leasing you have to pay smaller sums every month and make sure to keep up with the payments.
As you can see, there is no right or wrong answer as to whether leasing a car is the best option for you. But by weighing up the pros and cons, you’re one step closer to making the right decision for you.