If you’re thinking about leasing a car, then you might be wondering whether it is a good idea to lease privately, or through a business.
We understand that this can be a tough decision, and we know that you need to be as educated as possible so you can make the right decision for your situation.
In this article, we are going to look at the benefits of leasing privately, and whether leasing privately is right for you.
If you are looking for the business benefits of leasing a car, then you can read our article here.
How does leasing work?
Firstly, let’s have a look at how leasing works.
Leasing is where you have a car for a certain period of time (2-3 years) while paying a certain amount each month. Once that period is up, you hand the car back with nothing more to pay (subject to mileage and condition charges, of course).
You can lease both personally and through a business. However, we know that leasing through a business is not viable for everyone, which is why we’re going to focus on leasing privately.
There are two different types of lease agreements;
There is also hire purchase, but that is a finance agreement which you go into with the intention of owning the car at the end.
Personal contract hire is the most common form of leasing, and what we tend to mean when we refer to leasing. You essentially rent a car for a set period of time and when that time is up, you hand the car back with nothing more to pay. You obviously have to keep it in good condition and you have to stick to a pre-agreed mileage before you get the car, but it’s a very simple way of driving and having a car.
A personal contract purchase, however, is a bit different. It’s exactly the same during the contract but at the end you have three options;
- Purchase the car for a pre-agreed value
- This is called the Minimum Guaranteed Future Value and is set at the beginning of the contract. This won’t change.
- Part-exchange the car and put the money towards a deposit for another car
- Or hand the car back with nothing more to pay (subject to mileage and condition restrictions)
So, those are your two options for leasing a car. So, let’s get onto the benefits.
What are the benefits of leasing privately?
There are quite a few benefits to leasing, and there are quite a few benefits to leasing privately. Regardless of whether you are looking solely at privately leasing or if you are trying to decide between leasing privately or through business, you will find these benefits convincing.
- Generally speaking, it’s a lot easier than buying
- There are a lot of things that you don’t have to worry about when leasing a car, as we will go into more detail below. You have the car for a few years and as long as you stick to the mileage and keep it in good condition, you simply hand it back at the end. There is nothing else to worry about. You don’t even have to worry about road tax because that is usually included.
- You don’t have to worry about depreciation
- This is another huge advantage to leasing a car. Depreciation is one of the biggest issues about buying a car, as a car can lose quite a bit of their value. This means that you probably will end up losing money if you buy and then sell it on.
o If you lease, however, you won’t have to worry about that because you hand the car back.
- Fixed costs
- The cost of the monthly rental is fixed and road tax is usually included. Plus, you can get a maintenance agreement where you can pay monthly and that includes all your maintenance. You can read about maintenance agreements here.
- You can access fleet discounts
- If you lease a car, you could access fleet discounts that aren’t available to many private individuals
- You don’t have to pay company car tax
- If you are weighing up between going privately or through a business then the fact that you don’t have to pay company car tax. Particularly as there are new company car tax bands being introduced that mean that if you have a lower emission car. These bands mean that you could be paying considerably more if you had a lower emission car than you were. You can read more about that here.
So there are some of the benefits. As you can see, there are quite a few so you can understand why leasing is becoming more popular.
Leasing privately vs. business; which is better?
If you are considering whether to lease through business or privately, then you might be wondering which is better.
To be honest, it depends on what your situation is. When you lease through a business you have to pay company car tax. This mainly depends on how much CO2 your car emits and the P11d value of the car. So there are times where a company car is more financially viable but there are also times when it is not.
For example, if you were to get a Range Rover Evoque then it would be more financially viable to go privately. This is because it has a high P11d value and high CO2 emissions so the company car tax will be extremely high. Particularly with the new changes to company car tax.
So there are the benefits to leasing privately. There are quite a few and they can be extremely appealing to many. There are times when it is cheaper to lease through your business, but there are times when it’s more viable to lease privately. If you are in doubt, then we recommend talking to a trustworthy vehicle broker who will be happy to help.