If you’re new to leasing, then we’re here to help make the process as easy as possible for you. One way in which we can do this is to help you understand how leasing works and what taking out a lease means for you. To help with this we have a number of guides that will explain all the different aspects of leasing from how an application is processed through the duration of the lease, including maintaining the car and travelling, to the handover at the end of the contract. We’ve also put together a number of articles, including this one with five key things to know before you take out a lease.
Five Things You Need to Know About Leasing
If you’re thinking about leasing a new car and haven’t ever leased one before then we think there are essential things you need to know before deciding if it’s the right option for you.
1. A Lease is a Finance Agreement
The first thing to be aware of is that a lease agreement is a financial contract, which means that there are regulations in place to help protect you and the lender.
As it is a financial agreement there will be a credit check as part of the application process to ensure that it is affordable for you and does not overextend you with unaffordable credit. With the current economy, we have seen funders looking in more detail at expected affordability over the duration of the lease to make sure it does not become a hardship to you.
If you’re concerned about your credit and how this could affect your ability to lease a vehicle then why not take a look at our guide to leasing with poor credit.
A lease agreement is a financial commitment for a set period of time, the lease length, which means that when you sign the contract you are agreeing to make the initial payment, regular monthly payments and any charges that may be applied for late payment, early termination or damage to the product.
Another key factor to be aware of is the lease length as this is how long you will be committed to the vehicle, and payments, for. It is important that you consider the financial commitment and how your future plans may change your ability to pay for the vehicle.
2. You Will Have a Mileage Allowance
Another factor of the lease to consider is the mileage allowance.
All lease agreements will have a mileage allowance, and this will have an impact on the lease price. This is because the expected mileage will have an impact on vehicle wear, the resale value and is used as part of the calculation.
It is important that you try to be as accurate as possible with what your expected mileage will be and choose a mileage allowance that is close to this to avoid being charged for exceeding the limit or paying more than you needed to.
A lot of funders will allow you to make an amendment to your mileage if you find that you have over or underestimated your needs. However, you should be aware that any amendments you make will have an impact on the lease cost and may change your monthly payment amount.
Find out more about leasing mileage in our latest blog which answers the most commonly asked mileage questions.
3. You Will Not Own the Car
Personal contract hire (PCH) agreements, another name for lease agreements, and personal contract purchase (PCP) agreements can often be confused as they are fairly similar. The important difference is that with a PCH you do not own the car, whilst with a PCP you will be purchasing it with a balloon payment at the end of the contract.
It’s important to know that you will not own the lease car, and there is not usually the option for you to purchase it at the end of your contract. Some funders do allow the vehicle to be purchased and others may be able to give you the details of where it will be auctioned but this is not guaranteed.
As you don’t own the vehicle there may be a few occasions when you need to take additional steps to be able to do something with your car, such as getting the funder’s written permission or making sure you follow their particular process. The most common occurrences we see where the driver needs to do something they wouldn’t as the owner of the vehicle are:
- Travelling abroad in the car
- Getting a new number plate for a trailer or to replace a damaged / lost one
- Adding a private registration to the vehicle
4. The Fair Wear and Tear Guidelines
When you reach the end of your contract, or extension period if you keep it for longer than the initial lease, you will need to hand the vehicle back to the funder.
The British Vehicle Rental and Leasing Association (BVRLA) has set out clear fair wear and tear guidelines for acceptable vehicle condition upon return. Before you decide if leasing is the right choice for you we recommend reviewing these guidelines to make sure you will be able to adhere to them.
5. You Will Be Responsible for Maintaining the Vehicle
Even if you opt for a maintenance package you will be responsible for ensuring the vehicle is maintained and serviced in line with the manufacturer’s recommendations.
This may be easier if you include maintenance as part of the lease because you’ll have one number to call for any work to be completed and the cost is spread over monthly payments rather than irregular garage bills. But it is entirely up to you whether you choose to add a maintenance package and our team is available to answer any questions you may have on including one.
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