WordcatTop Quality Articles

Benefits of Leasing a Car

When it comes to buying a new car, few of us have the funds to buy the vehicle outright. Instead, we can choose between a variety of car finance options including car loans, hire purchase and car leasing plans.

Car leasing is already hugely popular in the States, where one in every four cars is leased. Now it is becoming increasingly popular in the UK too, thanks to its many benefits.

How car leasing works

Personal car leasing typically takes two forms: personal

Business leasing commonly takes three forms: business contract hire, business lease purchase and finance lease.

To lease a car, you commit to paying an agreed sum over a schedule of monthly instalments. At the end of the contract you simply hand the vehicle back, or take out a new lease on a new vehicle, or pay a final lump sum to purchase the vehicle. Depending on the lease plan, you may be required to put down a deposit at the start of the contract or make a lump sum payment at the end.

Your contract with the car leasing company may include road tax, breakdown cover and the servicing, maintenance, delivery and collection of the vehicle.

The benefits of leasing

Car leasing has many advantages compared to buying outright. Not only do you have freedom from negotiation of part-exchange trade-in prices, but you can regularly change your vehicle for a new one, without having to worry about how its depreciation will affect its value. You can also avoid the maintenance costs associated with an older car or van, and as you only pay the difference between the vehicle`s retail price and residual value for the length of the contract, you can usually afford to lease a car that you otherwise couldn`t afford to buy outright.

For businesses, leasing provides tax incentives. VAT registered businesses can reclaim 50% of the VAT element of the monthly rental and 100% of the VAT on maintenance charges - and there are even greater incentives where the leased vehicle is a van that is used for business purposes only. Leasing also allows businesses to manage a vehicle`s projected depreciation over a fixed term.

Car leasing contracts

Typically, car leasing contracts last for one to four years. Your responsibilities, aside from making your monthly payments to plan and on time, will be to keep within a pre-agreed mileage limit of 10,000-40,000 miles a year and to keep the vehicle in a good condition and in a good state of repair. If you do exceed your mileage allowance, an excess charge per mile will be applied at the end of the contract.

Insurance for lease cars

If you do decide to lease a car you will need to ensure that you have adequate car insurance cover. Although the minimum level of cover required in the UK is Third Party insurance, the lease company, as the registered owner of the vehicle, is within its rights to require that you take out fully comprehensive cover to protect against theft and damage.