Is car leasing bad?

We look at why car leasing might not be right for you...

Car leasing has become increasingly popular here in the UK over the past few years, for both business and personal use. More and more people are leasing their cars than ever before and many are seeing it as a viable option for getting their next car.

That said, despite its rising popularity, there is still a common misconception that car leasing is a bad idea. But is this the case?

You may have noticed already that we are a car leasing company. So you may be wondering why on earth we would discuss whether car leasing is a bad idea when we lease cars ourselves. That would be like McDonald’s telling you that fast food is unhealthy.

However, we at OSV pride ourselves on our transparency, and want our potential customers to know everything there is to know about car leasing before they actually lease a car. And that includes the downsides.

We know that car leasing isn’t for everyone, and it would be irresponsible of us to try and convince you otherwise. So in this article, we are going to look at times when car leasing wouldn’t be the best idea for you, and also quell some of the common misconceptions about car leasing while we’re at it.

When is car leasing a bad idea?

There will be times when car leasing just isn’t for you. We’re going to go through some of the scenarios in which car leasing wouldn’t be the best idea, and your alternatives.

You want to own your car

This is probably the most common reason car leasing wouldn’t be for you. When you lease a car, you hand it back at the end of the contact. The most common lease contract is a contract hire (or personal contract hire) and it is designed for you to give the car back once your contract is up.

If you know that you want to own your car at the end, then car leasing is not for you. Instead, you should look at a hire purchase. This is where you pay a monthly fee for the car for a set period of time and once that time is up you own the car forever. Or, until you want to sell it. This is a much better option for those who want to own their car at the end of a contract.

people at a dealership discussing new car purchase

If you are unsure as to whether you want to own the car at the end, then you will want to consider a contract purchase (or personal contract purchase). This gives you the option to own at the end, for a fee, or you can hand it back.

So if you want to own your car at the end of your contract, something that many do like to do, then car leasing is not right for you. However, this doesn’t mean you have to buy a car outright, you can still look at contract options such as a hire purchase or, in some cases, a contract purchase.

You are going to be doing high mileage

When you hand your lease car back to the finance house at the end of the contract, they will then sell it on. How they do this depends on the finance house but regardless, the car will be sold on once you have handed it back.

And one of the biggest things that affects the resale value of a car is the mileage. At the start of your lease contact, you and  your vehicle broker will agree on a set amount of miles that you will do each year in your lease car. This can range from 8,000 miles to 30,000 miles. If you go over this mileage, you will have to pay an excess mileage charge, which you can read about here.

What Happens When I Go Over my Miles on a Lease Car?

However, if you are going to be doing a lot of driving in your car, that is more than the average person, then leasing probably isn’t for you. This is because there aren’t many finance houses that will go over 30,000 miles a year and if they do, it will cost you considerably more. If you are going to be doing more than that, then a contract hire isn’t a good idea. You can read more about maximum mileage on a lease car here.

That said, you can still look at a monthly contract. If you are doing high mileage, then we suggest looking at a finance lease. This has no mileage limits. Alternatively, a hire purchase, as you are going to own the car at the end it doesn’t matter how many miles you want to put in before you officially own it.

You aren’t sure whether you will be able to see the contract through

Before you lease a car, you need to realistically think about where you are going to be by the time the contract comes to an end. Lease contracts are designed to be seen to the end, they aren’t made for ending halfway through.

So, if you want to lease a car but you think you might be travelling in the near future, you might want to rethink the lease option. Unless, of course, you want to continue to pay for your car to sit on your drive while you travel the world. Alternatively, if you think you might be moving somewhere where you don’t need a car, such as London, then you might want to consider another option.

You can’t simply end the contact, there is a process and it can be quite arduous and expensive. Alternative options in this case are second hand cars, which you can read about here, or a short term lease. A short term lease can be for up to a year, so if you are planning on travelling but need a car for the time being then this is a viable option.

Another option is again, hire purchase. To end a hire purchase contract early you simply have to pay off the remaining finance. It might be costly, but if you do have a change of circumstance it could be easier than trying to end a lease contract. You can read about ending your lease contract early here for more information.

You won’t be able to keep up the monthly payments

If you don’t like the thought of monthly payments, then a lease car isn’t for you. If you aren’t sure whether you are going to be able to keep up the monthly payments for the duration of the contract, then leasing isn’t for you.

Missing a payment on a lease car can come with serious repercussions that could include court action and will include a mark on your credit score. This in turn will make it harder for you to get other loans, mortgages etc. If you aren’t sure whether you can keep up the monthly payments, or want to pay monthly, then leasing isn’t for you. Your best option here would be to look at a second hand car, as you can pay that all in one go and don’t have to worry about money coming out every month.

is car leasing bad?

So those are some of the reasons car leasing might be a bad idea for you. As you can see, there are a few scenarios in which car leasing is a bad idea, but these may not apply to you. If they don’t apply to you, then there is no reason why leasing wouldn’t be a great idea. You can read why leasing is a good idea here.

What are some of the common misconceptions about car leasing?

So, we’ve quelled most of the common misconceptions about car leasing, but what about the others?

  • It’s expensive
    • This isn’t the case. In fact, leasing a car can be cheaper than buying one, particularly if you are leasing a prestige car such as a Mercedes or BMW.
    • When you lease a car, you are paying for the depreciation, rather than the car itself. Prestige cars depreciate a lot slower than other cars meaning that you could save yourself a lot of money if you leased one rather than bought a car.
  • Leasing is only good for businesses
    • It is true that there are some great lease deals for businesses, but that doesn’t mean there aren’t great deals for personal customers as well. Going through a reputable and trustworthy vehicle broker will mean that you have access to some great personal deals that many others might not have access to.
  • There are lots of hidden costs
    • It is true that there are additional costs when it comes to leasing a car, but these are not hidden. When you lease a car you have to have fully comprehensive insurance, and pay for servicing. And, you will have to pay an administration fee when you first lease your car. But, these costs aren’t or should not be hidden. You should be made aware of these costs at the beginning before you sign any contract.
    • A reputable vehicle broker will make sure that you are aware of these additional costs at the start, so you won’t be caught out later down the line.
    • You can read our article on additional costs when leasing a car here.

As you can see, these are things quite often said about leasing, but they aren’t always true.

After all that, is car leasing bad? No, it isn’t. It is a bad idea for some people, however. For example, those that want to own their car at the end, or are going to be doing a high mileage, or are unsure whether they will be able to see the contract through to the end. In which case, there are plenty of alternatives available for those who aren’t right for leasing. If these scenarios don’t apply to you, then there is no reason why car leasing is a bad idea. In fact, it could be the best decision you ever make.

Armed with all of the limitations of a lease.  It's time to see if leasing is right for you with our  Ultimate Guide to Leasing a Car

Holly Martin

Content Co-ordinator at OSV Ltd
Holly enjoys: Reading, music and spending time with friends.

Within a week of Holly starting work at OSV she became an indispensable part of the marketing team. She's very intuitive and gets on with the whole office effortlessly.
Holly Martin

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