What’s the catch with leasing a car?

Car leasing has become extremely popular within the last 5 years, and with the prices some lease companies are offering, it’s easy to see why. However, some people are sceptical about the too-good-to-be-true deals when it comes to leasing a car.

We understand why people are sceptical, with such great deals there simply has to be a catch.

Well, no, there’s not. There are some things that you should take into consideration when leasing a car, and whether these things count as ‘catches’ or not is completely subjective. The only way, really, you would get caught out is if your vehicle broker did not go over it with you before you signed along the dotted line.
At OSV we have years of experience educating customers, which is why we are going to explain what we think count as ‘catches’ in lease contracts to reassure you that you won’t be caught out by a hidden cost.

What is Car Leasing?

Let’s start from the beginning. Car leasing is essentially a financing option where you have a car for two to three years, paying monthly installments. At the end of the contract, you give it back to the leasing company. The price of a leasing contract is determined by a few factors;

The car you want
The size of the initial payment (sometimes referred to as a deposit even though it’s non-refundable)
The mileage
The level of discount available on your preferred car (this can vary drastically for a number of reasons)
The length of the lease contract

However, there are a few extra costs that are not necessarily included in your lease contract, which is where people get caught out. We’re going to explain those things, to make sure you don’t.

This isn’t an exhaustive list, and for more information you can read our article on what affects lease price.

Do I Own the Car at the End of the Contract?

No, basically. Unless you go for a cash purchase or a purchase agreement, you will not own the car at the end of the contract. The car will not be yours to trade in or sell at the end of the contract, so you will need to find money elsewhere to fund your next car.

However, the benefit of this is you won’t have to deal with the hassle of reselling the car, nor will you have to worry about depreciation.

If you do want the option to buy your car at the end of your contract, then you should consider a personal contract purchase.
You can read more about what happens at the end of a lease agreement here. [vc_single_image image=”3642″ img_size=”article-image”]

What Happens If I Go Over my Mileage?

With a lease contract, you have a set number of miles for each year. You set this before you receive your car. You can change this halfway through your contract, but more on that in a little bit.

At the end of your lease, the finance house will collect the car and check the mileage. If you have gone over your mileage you will incur an excess mileage charge. This varies depending on makes and models and can range from 6p+VAT per mile for an Audi to 13.96p+VAT per mile for a BMW.

You can, if you think you’ll go over your agreed mileage, increase it during your contract but this isn’t always the cheaper option. For example;

Mrs. Johnson drives between 20,000 miles a year and 22,000 miles a year. If she pays for a 25,000 allowance it will cost her an extra £100 a month (£1,200 a year). However, if she chooses the 20,000 mile allowance and does 22,000 miles, with the excess mileage charge at 6p+VAT per mile, she will only have to pay £120 extra.

To avoid you getting caught out with excess charges, your broker should go over this with you before you sign anything. If you want to find out more you can read this article on excess mileage.

Do I Have to Service my Lease Car?

Yes you absolutely do have to service your lease car. How much this will cost depends on the manufacturer and the model. The time between services also varies. Some manufacturers will set intervals of 20,000 miles or 2 years, depending on which comes first, and other manufacturers will require servicing every 12,500 miles or once a year.

Naturally, this will affect how much it will cost you.

For example, if you had a Ford Focus, here’s what the servicing costs would look like*

Service Number 1: £150.00

Service Number 2: £230.00

Service Number 3: £150.00

Service Number 4: £350.00

*this is a rough guide and is of May 2016

This is a very rough breakdown of the servicing costs, but we’ve written a much more detailed guide to servicing your lease car for you to read.

Do I Have to Pay for Insurance?

One of the additional costs when leasing a car is that you have to pay for insurance. But it can’t just be any old third party insurance; it has to be fully comprehensive.
You can’t take out third party because, as we’ve said above, the car is not your property, and third party cover would only pay for the damage to other people’s property in the event of a claim, so you’d be left to foot the bill for the repairs to avoid getting charged at the end of your lease.

Am I Responsible for any Damage to my Lease Car?

Yes, you are. At the end of your lease agreement,you need to return the vehicle in an acceptable condition. Of course, standard wear and tear is acceptable.

A reputable broker should provide you with the BVRLA Fair Wear and Tear Guide at the start of your lease. This is the criteria that all manufacturers must adhere to when they judge the quality of the car when the receive it at the end of a lease contract. If you damage your car during your contract it is your responsibility to fix the damages before you hand it back. If you don’t, you could incur charges.

You shouldn’t be caught out by damage costs as your broker should provide you with the guide above so you know exactly how to avoid additional costs and eliminate this risk.

So, is there really a ‘catch’ when leasing a car?

Ultimately, it depends on what you would consider a ‘catch’. Yes, there are additional costs but these should be covered by your vehicle broker before you sign anything.

Everything you are responsible for paying for will be stated in the agreement. There’s nothing that we’ve mentioned above that should catch you out, the only way you would get caught out is if your vehicle broker failed to mention it but this can easily be avoided by leasing through a trustworthy vehicle broker.

As long as you go through an accredited, reputable broker, there is very little chance that you will be caught out by any charges or costs.

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