Benefits and risks of car leasing
In this guide, we’ll take a look at the key benefits and risks you should be aware of when taking out a new car lease.
What do I need to get started, and what are the benefits?
Let’s start with what you need to be eligible for a car lease.
To take out a new lease, you need to meet certain criteria in order to qualify:
- Your age: You must be over 18 years old.
- Driving license: You need to hold a full UK driving license.
- You need to be working: We’ll look at your employment history for the past 3 years.
- Proof of address: We’ll need to see your address history for the past 3 years.
- Your credit rating: You should have a good credit rating (each application uses different criteria so we can’t advise on specifics with regards to credit ratings).
- The car needs to be for you: The product is not suitable for customers wishing to take out a lease on behalf of another person or for another person’s use.
Now, let’s look at the key benefits.
There’s several reasons why leasing is becoming one of the most popular ways to drive a new car:
- You’ll have a brand new vehicle with generally lower monthly repayments than other forms of funding (access to leasing discounts and special offers available in the market).
- Flexible contract terms ranging from 24 to 48 months in length, with the ability to extend the contract if you love the car.
- You get to return the vehicle and simply hand it back at the end of your contract - there is no benefit or detriment if the vehicle is worth more or less than it’s forecast value when the contract ends.
- You’ll get a new car more frequently.
- You’ll receive free delivery straight to your home.
- The hassle of having to sell the car is gone, as the funder takes care of this when your lease ends.
- Monthly repayments that are fixed and never change, making it easier to budget (please note that any changes to VAT are out with our control and may affect your rental).
- Reduced risk from losing money as you don’t need to worry about depreciation in the value of the car.
- Manufacturers warranty, roadside assistance and road tax is included throughout the duration of the contract.
- Customer service, account manager support and guidance are provided throughout your time with us.
- And, there’s a comprehensive vehicle maintenance package if selected as part of the contract. This will include all servicing, MOT and maintenance.
Great, you’re keen to go ahead. But have you considered potential risks?
There’s a few potential risks and costs that are worth considering.
At this point, you’ll be getting excited to go ahead and order your brand new lease car. But, don’t forget to consider all the costs before signing up:
- You will never own the vehicle.
- The payments are mileage dependent. The higher the mileage covered the higher the payment.
- If you fail to pay the rentals this will result in your vehicle being repossessed.
- If you miss or are late with payments this can adversely impact your credit rating, which may make obtaining credit more difficult and expensive in future.
- You must have fully comprehensive insurance.
- If the vehicle is returned with damage, and the damage goes beyond established industry guidelines – known as BVRLA Fair Wear and Tear – you may incur charges to repair that damage.
- If you terminate the lease early, you may be liable to pay an early termination fee. Please note, there are no statutory rights to voluntary termination or early repayment.
- If you cancel an order then you may be charged a cancellation fee depending on how late you cancel and how difficult if would be to resell the vehicle.
- If you drive beyond the agreed mileage limit, you’ll be charged an excess mileage rate which is outlined in your agreement. Mileage limits can sometimes be amended up or down after the first year of the lease contract, as long as there is at least 6 months left until the end of the lease.
- There is no benefit from returning the vehicle under mileage.
- The vehicle must be maintained to a high standard, and serviced in accordance with the manufacturer requirements to maintain.
- If you don’t take the additional maintenance package, then the cost for all servicing, MOT and maintenance (wear and tear items like tyres, brakes and windscreen wiper blades, oil and anti-freeze top ups) will be your responsibility.
- If the contract hire agreement is longer than the manufacturer’s warranty period, then the risk of any repair cost is your responsibility. Typically, manufacturer warranty periods are 3 years, so a contract length of 48 months would leave you bearing the risk for the final 12 months of the contract. Alternatively, if the vehicle was registered before the contract hire agreement commenced (e.g. a contract on a used vehicle) then the warranty may expire before the end of a 36 month agreement and the MOT will be due before the end of the contract.
- Roadside assistance/breakdown cover varies by different manufacturers, and may not run for the full length of the contract hire agreement. Typically, the roadside assistance/breakdown cover will only last for 12 months even if the warranty period is 36 months.
If you fail to arrange vehicle collection before your contract ends, then additional rentals will be charged until collection takes place.
If Government decides to increase tax, fuel duty or road fund license costs within the life of the lease contract you will have to pay any additional amounts due.
- If you incur parking, speeding or any other fines during the life of the lease contract you will have to pay for them, and you may well incur an additional administration fee if the lease company has to pay the fine on your behalf.
- If the vehicle is considered a total loss after accident or theft you must claim on your insurance, are not entitled to a refund of rentals and if there is a shortfall in the claim then you may be liable for any outstanding sums.
- The taxable list price, known as the P11D value, is submitted by the supplying dealer at the point of registration (not order) and there is a risk that this value may increase between order and registration. If the taxable list price changes and goes over £40,000 (Expensive Vehicle Tax threshold), the cost of the road tax will also increase, and you will be charged the additional road tax costs as they will not have been included in your original quote.
How do I get started?
You can now view our latest offers on our car leasing page and select the car that suits you best. Once you've enquired a member of our team will be in touch to provide a tailored quote and help you through the process. If you need more information on what's involved, you can watch our short explainer video.