When you are approaching the end of your lease agreement, you will inevitably be thinking about your options.
Of course, you can hand your car back, as is the case with many lease agreements. However, some may be considering renewing their lease contract or even buying their lease car.
In this article, we will be looking at whether you should buy your lease car or renew your lease agreement at the end of the contract, how it can be done and whether it is right for you.
Should I buy my lease car at the end of the agreement?
If you love your lease car so much that you can’t simply imagine parting with it, then you might be considering buying it.
Lease contracts, such as Personal Contract Hire, are not really designed for you to buy the car at the end. This is mainly down to HMRC and VAT reasons, and is particularly the case if you are a business as you have been claiming the VAT back.
If you are reading this because you aren’t sure what contract to go for and you think you might want to own the car at the end of the contract, then we advise looking at a Hire Purchase or a Personal Contract Purchase.
However, although they are not designed that way doesn’t mean that it can’t be done. Most finance houses will be happy to give you a purchase price for your vehicle. Then, it is down to you to find a third party to buy the car. Whether they then keep it for themselves or buy it on your behalf and you give them the money for it is down to you. Admittedly, it’s a bit cheeky in terms of the VAT, especially if you are a business. I’ve never had a time where HMRC aren’t happy with it, but it doesn’t mean that they will always turn a blind eye. While it’s not been a problem in the past doesn’t mean it’s going to stay that way so you do this at your own risk.
If you love your car so much that you have realised you want to buy it, then you can do so.
Should I renew my lease contract?
Whether you can extend or renew your lease contract is down to the finance house. Some finance houses allow you to extend or renew your lease contract no problem but others don’t.
Renewing your lease contract is an option if you are not ready to part with your car just yet but you don’t want to buy it. Alternatively, if you are waiting for a new car that is on order, you might want to extend your lease contract while waiting for your new car to be delivered.
To do this you will ring the finance house and tell them that you want to renew your lease contract. They will then recalculate your monthly costs according to how long you have had the car, how many miles it has done etc. Once you agree to the new price then you can renew the contract. The cost may increase or it may not, it depends on the current depreciation costs of the car.
How long can I renew my lease contract for?
Generally you can renew your contract for anything up to 12 months, though it is really up to the discretion of the lease company. Some will have a maximum term and others will negotiate based on personal circumstance.
Should I Buy or Renew My Lease Agreement?
Although it is possible, should you really buy your lease car or renew your lease agreement?
If you really can’t imagine parting with your car, then there is no reason why you shouldn’t look into buying your lease vehicle. Likewise if you want to keep it for a bit longer and you don’t want to have to put down another initial payment.
However, there are other things you have to think about. If you have had your car for three years and you extend your contract or buy the car, then the chances are you will be out of the manufacturer’s warranty. Most warranties last three years, the same amount of time as a standard lease contract. This means that you are eligible for repair costs should something go wrong with your car. You could end up paying for new tyres, brake pads and all the things that come with maintaining a car that is out of warranty. That said, you could look at an extended warranty but this doesn’t cover everything. You can read more about extended warranties here.
You will also have to pay to have the car MOT’d. This is another additional cost that you will have to take into consideration when you renew your lease agreement.
While cars are built to last a long time, there are things that can go wrong quite early on. This means that you could end up spending more money than you might have originally thought. You can read more about getting your car MOT’d here.
Also, as we said, there is a chance that your monthly rentals could go up. This might not happen but there is a possibility that it will and again, this is something you will have to take into account in regards to your monthly budgeting.
It is your choice though, if you don’t want to part with your car then there is no reason you shouldn’t do one of the options above. However, there are other things that you need to think about before you make the decision.
In conclusion, you can renew your lease contract if you wish and the finance house agrees to it. There may be some finance houses who do not agree to this in which case there is nothing we or yourself can do. Technically, you can’t buy your lease car because of HMRC and VAT regulations. However, you can often get a purchase price and then find someone to buy the car off the finance house. If they then sell it to you, that is none of our business. If you do decide to do either of these options then you need to take into account the fact that you will be paying for the vehicle’s MOT and that the vehicle will more than likely be out of warranty. This means that you could end up paying for repairs that you didn’t have to previously. Your monthly payments may also increase which is another thing you will have to take into consideration. If you aren’t sure whether you want to own your car at the end of a contract, we recommend taking a look at some other finance options before you make a decision. We help people make this decision all the time, so if you are unsure as to what to do at the end of your contract, please don’t hesitate to contact us.
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