Is car leasing worth it?
- How does a car leasing contract work?
- What are the advantages of a lease?
- What are the disadvantages of a lease?
- What are the business benefits of a lease?
- What are the business disadvantages of a lease?
- Is car leasing worth it?
- Is car leasing right for me?
Are you wondering if car leasing is worth it? Is it good value for money? Maybe you know people that have leased before but you are just not sure if it is right for you.
There are so many different elements to take into consideration for example the ins and outs of a car leasing contract, how it works and is it worth the money?
OSV took to their 61k YouTube subscribers asking the question ‘Do you think car leasing contracts are good value for money?’. Here is what they said:
The poll collected 895 votes in 2 days and 73% of those voted that car leasing contracts are not good value for money with a small 27% seeing the benefit to leasing a vehicle. As we can see, there seems to be the notion that car leasing contracts are not good value for money. But why is that and is that correct? Let’s find out.
The general consensus among the comments is that it depends on the vehicle. However, many people believe that it makes sense when leasing a premium vehicle, but is this true?
When it comes to flagship premium saloons, generally, if buying new it wouldn’t be sensible not to lease your vehicle. This is due to the manufacturers heavily supporting this niche of cars so people see more of them out on the roads. However high-performance premium vehicles such as BMW M4, Audi RS range, Porsche and the likes of, genuinely would not make sense to do anything other than own, as manufacturers do not support these vehicles with discounts. However, whether this is a suitable solution for you does depend on you as the customer and your situation as we would need to understand your business or individual situation in order to give you suitable advice. Not all of us could afford to purchase one of these high-performance premium vehicles outright and therefore leasing might be the most suitable option. We would also always recommend you talk to your accountant.
When it comes to mainstream vehicles each brand defines certain models for high production or for traditional retail business. For example, if we look at Ford the Fiesta, Focus and Mondeo are all high volume production vehicles so attract larger discounts when leasing, compared to the C-Max and S-Max which are retail vehicles and although do attract some low APR and retail incentives, discounts are nowhere near as generous as on the mainstream models and therefore purchase makes more sense. However, again purchasing may not be the right solution for you so we would encourage you to speak with our Vehicle Specialists and your accountant to explore your options in more detail.
This tends to be the norm, however, there are always exceptions where larger discounts are found on vehicles. The reality is you need to speak to an expert that knows what to look for, and we have a team of experienced vehicle specialists that can do exactly that.
Another reason raised for not leasing was that you do not own the vehicle, and some cannot understand paying for something that will not be theirs. While this is true, it’s worth remembering that when you lease a vehicle. Overall, the understanding is that a car leasing contract is great for the incredible discounts available on high volume cars, but also for the convenience. In a car leasing contract things like warranty issues, depreciation and road tax isn’t something that you have to worry about.
We have addressed what our audience thought about the question ‘Is car leasing worth it?’ so let’s dive in and understand how a car leasing contract works including the advantages and disadvantages, the benefits to businesses and of course answering the ultimate question: is car leasing worth it?
What is a car leasing contract and how does it work?
A car leasing contract is a long term agreement usually between 2 – 5 years where you pay a fixed monthly cost for a vehicle. At the end of the agreement, you give your vehicle back with nothing further to pay subject to mileage and condition. When you lease a vehicle you never actually own the vehicle and therefore have no responsibility for the value of it. You are effectively renting the vehicle for the agreed time period.
Leasing a vehicle is an attractive option for both individuals and business owners due to the multitude of benefits that come with car leasing.
What are the advantages of a lease?
So, let’s explore the benefits of leasing your next vehicle and why 27% of our audience deemed car leasing as good value for money. The advantages to leasing include:
- Fixed monthly payments
- Road tax included
- No need to worry about vehicle depreciation
- No risk of negative equity
The great thing about leasing is you know what you are going to pay from the very beginning, there are no hidden costs, for example when leasing a vehicle, you see upfront the fixed monthly costs you have to pay throughout the contract. Everything besides the costs for fuel and possible damage is presented to you right from the start. So, you won’t need to worry about guesstimating vehicle costs throughout the lease, as everything is shown to you ahead of time.
Are you someone that loves to have the latest technology, safety equipment and stylings in your vehicle? Or maybe you like to upgrade your vehicle every few years. If this is you, then leasing could be the perfect option. It not only means you get to drive the most up to date vehicles, but it also saves you money in the long run. But how?
Let me explain…
When you lease a vehicle, you don’t have to worry about selling it at the end of the contract, as you are renting the vehicle for a set period of time. Your monthly payments are often lower than they would be on a Contract Purchase agreement as the payments on a vehicle lease cover the amount that the vehicle will depreciate over the time that you have it for. This also means that the depreciation of the vehicle isn’t something that concerns you as there is no risk of you being in negative equity. All you need to think about is the latest vehicle you’d like to lease, and we take care of the rest. Although it is important you are aware that you will be responsible for the fair wear and tear of the vehicle at the end of the agreement.
A car leasing contract also gives you the opportunity to drive the latest vehicles on the market, which may not be a sustainable option if you were to outright purchase it – you also often get a much bigger discount when you lease as opposed to buying high volume cars such as the flagship saloons mentioned earlier on.
What are the disadvantages of a lease?
We’ve spoken a bit about the basics of a car leasing contract and the great benefits you can expect, but it is also important that you are aware of the possible disadvantages when it comes to leasing. These include:
- You don’t own the vehicle and there is no option to own
- The contract is for a set period of time
- Mileage and Condition charges will apply
- The vehicle has to be serviced at an approved dealer
- Servicing is not included in your lease unless you take out a maintenance package
When leasing a vehicle you are effectively renting it for a fixed period of time. This fixed contract also means that, although you do not actually own the vehicle, you are responsible for it until you give it back. This means you must cover the service fees and any damages to the vehicle. One way to save money and eliminate worry would be to add a maintenance package to your car leasing contract.
If at some point you decide to leave your car leasing contract early you’ll be faced with fees that are unknown until the time of leaving. You can get an early termination figure at the start of your contract, but it completely depends on what happens to the vehicle in terms of depreciation.
In car leasing contracts your road tax is included, however with this comes a downside as if the Government decides to increase the cost of road tax for your vehicle then the additional cost will be passed onto you.
Additionally, if you miss any payments throughout your lease contract, your credit score could be affected. For more about what you need to know about credit checks and car leasing read our in-depth article for the ultimate guide.
What are the business benefits of a lease?
If you’re a business owner in need of a vehicle or a fleet of vehicles, you may ask yourself “Is car leasing a good idea for my business?” and the answer really does depend on your business and the vehicle you are looking for.
You may be a business that wants to own vehicles which would mean that a lease wouldn’t be suitable for you. Whereas other businesses will see a vehicle as a depreciating asset and would rather focus on developing their business than to deal with the hassles of purchasing and selling vehicles themselves. So these businesses could benefit from the cost and time savings that come with car leasing.
Advantages of leasing for business include:
- No need to worry about depreciation
- Maintenance package
- Time savings
- Tax benefits
With a car lease contract, as a business you don’t have to worry about the depreciation of the vehicle, re-selling it once you want to upgrade or paying tax on it.
Another attractive reason for business car leasing is the option to add a maintenance package – this is particularly useful if you’re getting a fleet of vehicles. A maintenance package relieves the stress of sorting out any accidents employees have, checking that drivers have got driving licences, vehicles haven’t gone over the agreed mileage and more. Having this support package ensures you have more time for yourself and the development of your business. For more in-depth information about the benefits of business car leasing read our detailed article here.
So, for a busy business, whether you need just one vehicle or a fleet for your employees, to be able to save time and money for your company could definitely make car leasing worth it. We would always recommend that you speak to your Accountant before committing to any finance or lease scheme.
What are the business disadvantages of a lease?
In terms of how and if car leasing is a disadvantage for your business, there really is not a lot to say. If you compare a car leasing contract to a personal contract purchase (PCP), then perhaps there isn’t quite as much certainty of the costs of leaving a lease early compared to a PCP.
If a lease contract for your business seems too expensive, you want to keep the vehicle for longer than five years or you simply question “is car leasing worth it?”, it’s could be that leasing a car is the wrong option for you or you just need some more information from our experienced team. If you’re really unsure about the best option for you and your business when getting a vehicle, we recommend talking to one of our Vehicle Specialists and together navigate the best solution for you.
Is car leasing worth it?
You now have all the important facts about leasing so, is car leasing really worth it?
The answer is it really does depend on you as an individual or your business and your needs. A vehicle lease is worth it if:
- You need to save time
- You want to enjoy tax savings if it is a business rental
- You don’t want to worry about vehicle depreciation
- You prefer fixed monthly payments
- You don’t want to own your vehicle
- You want to change your vehicle regularly
Many people don’t realise that with leasing your fixed monthly payments are covering the depreciation of the vehicle which for premium vehicles they can depreciate at a slower rate, in turn, this can be the reason for monthly payments being lower and makes high end, premium vehicles more accessible via leasing.
However, it doesn’t mean vehicle leasing is your only option or that it is right for you. At OSV we provide all finance options which you can learn more about in our Finance section or speak with one of our Vehicle Specialists.
Is car leasing right for me?
Now that we have explored if car leasing is worth it, you may be wondering if it is the right option for you or your business. Let me ask you a few questions:
Are you looking at adding vehicles to your current fleet?
Do you want the latest vehicle?
Would you prefer fixed monthly payments?
Are you happy to return the vehicle at the end of the agreement?
Are you happy upgrading your vehicle every two to five years?
If you’ve answered yes to any of these then it’s highly likely a car leasing contract is right for you. However, if you are unsure, have more questions or would like to explore your options, our team of experienced vehicle specialists are on hand to help.
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