You’re looking for a new car, and you might be considering leasing it. Except, one of the worries many of our customers get is that they can’t afford to lease.
The chances are, you can afford to lease a car. There’s a common misconception that leasing is more expensive. But, it’s actually not.
However, there are some things that you should consider first. We advise people on this every day. And, it’s important to us that we put some of these misconceptions to bed. So, we’ve written an article on lease prices, what affects them, and how you can afford a lease car.
How much does a lease car cost?
Obviously, there’s no one answer to this question. The price of a lease car can vary depending on a number of factors. However, we can tell you how the monthly lease price is calculated. This should give you an idea of how that monthly figure has come about;
(retail price – estimated residual value)/months on contract + admin fees = monthly payments
What affects lease price?
As I mentioned above, the price of a lease car can depend on multiple factors. Some of these include;
- The type of vehicle
- Length of your contract
- Contracts can be between 1 and 5 years. Traditionally, the longer the agreement the cheaper the monthly payments. But, this is not always the case.
- The price of a lease is determined by the residual value of the car. This is how much it is worth at the end of the contract. The higher the mileage, the lower the value at the end of the contract.
- Initial payment
- Again, the amount you pay over the course of your lease stays the same. So, if you put down a higher initial payment then you’ll have lower monthly payments. Again, if you only put down a small amount for your initial payment, you’ll have higher monthlies.
- Your credit rating
- Residual value of the car
- Any additional features
As you can see, there are quite a few things that affect the lease price. You can read more about what affects lease price here.
Are there hidden costs when leasing a car?
Another misconception about leasing is that there are hidden costs.
When you lease a car, there are extra costs. Of course, there are extra costs regardless of how you finance your car. But, these should not be hidden. If you go through a trustworthy broker they will be completely transparent about costs from the word go.
If they aren’t, then they aren’t trustworthy. You can read about how to tell if your vehicle broker is trustworthy here.
But anyway, there are no hidden costs when leasing a car. Extra costs, on the other hand, are something that you have to consider before getting a new vehicle.
What are the extra costs when leasing a car?
So, now we’ve established that there shouldn’t be any hidden costs that catch you out, what are the extra costs when it comes to leasing?
Some of the extra costs include;
- As I’ve mentioned, it affects the price of your lease. To be honest, it’s not necessarily an extra cost as such, but you should budget for it.
- Administration fee
- This will not be included when you lease a car
- The cost of the admin fee does vary between brokers. Generally, though, they charge around £300.
- While it may seem like a lot of money, there is reason behind it. You can read our article on why you should pay an admin fee here.
- Also, be aware of brokers that say they do not charge an admin fee. The chances are they do, but they will disguise it as something else down the line. You need to make sure your broker is completely honest with you.
- Maintenance and servicing
- You have to get your car serviced. This is in line with the terms and conditions of your lease. You have to ensure you budget for the servicing costs. You can read our article on servicing costs here.
- Alternatively, you can get a maintenance agreement. This spreads the cost of servicing your lease car over the duration of your contract. You can read about what is included in a maintenance agreement here.
- This is an extra cost for every driver. But when you lease, you have to get fully comprehensive insurance.
- This can be more expensive than your standard third party insurance. And can take your monthly payments above your budget. So, it’s important you take insurance into consideration when budgeting for your lease car.
So, these are some of the extra costs that come with car leasing. It’s important you think about these while budgeting for your lease. For more information on hidden costs when leasing a car, read our article here.
Is there a criteria for leasing a car?
We’ve talked about pricing, now you might be wondering if you can actually lease a car.
There is no set criterion for leasing a car. However, there are things that the finance house looks at before they approve you for finance. These include;
- Your credit score
- This is probably the most important thing when it comes to getting approved for car finance.
- The finance company need to know that you are going to be able to make the payments.
- If you want to find out more about leasing with bad credit, then you can read our article here.
- What you are using the vehicle for
- How old you are
- If you are a young driver, the chances are you have no credit rating. This means leasing a car can come with some complications. For more information, you can read our article here.
- Your income
So, while there is no set criteria, there are things that you have to think about.
What things should I think about when budgeting for a lease car?
Before you decide what car to lease, you need to think about your budget. There are a few things you should take into consideration. These are things such as;
- How much you want to spend a month
- How many miles you want to do
- The cost of insurance – for more information on how leasing affects insurance you can read our article here
- Whether you will have enough money to spare for servicing and maintenance costs
What are the cheapest cars to lease?
To be honest, there’s no definitive answer to which car is cheaper to lease. This is because the monthly payments are dependent on the residual value. Therefore, a cheaper car doesn’t necessarily equate to a cheaper lease.
But generally, it’s the city cars that are cheaper to lease. These include things such as;
What can I do to lower the price of my lease?
So, can you lower the cost of your lease?
There are some things that you can do to lower the price of your lease. For example;
- Putting down a larger initial payment
- It won’t lower the price of your lease as such, but it will make your monthly payments lower
- Go for a lower mileage
- Lower mileage means cheaper monthly payments. It could also be cheaper for you to pay the excess mileage charge should you go over. For more information you can read our article on excess mileage here.
- Go for a longer contract
- The longer your contract, the lower your monthly payments will be. This is because you are still paying the same amount, just over a longer period of time.
- Be flexible
- You can often pick up some great offers if you are a little bit more flexible with your requirements.
So yes, the chances are you can afford a lease car. Hopefully we have cleared a few things up about leasing. There are a lot of things that affect lease price, and some things that you can do to lower that price. Ultimately, leasing is not half as expensive or as daunting as it first looks. The most important thing to remember is to make sure you are totally comfortable you can afford it the agreement you are about to enter.