We’ve seen a lot of drivers over the past few months extend their lease agreements until the economy stabilises, as rising interest rates and inflation are not only directly affecting lease prices but also the other expenses drivers need to consider when looking at a new car. With this in mind we think it’s important to share a few key considerations that you need to know if you’re thinking about keeping your lease car for a little longer.
Informal Vs Formal Extensions
The first thing you need to know is that there are two types of car lease extension; informal and formal.
An informal extension is simply where you keep the car past the original contract date but do not enter into a new financial agreement with them. Whereas, with a formal extension you will sign documentation committing to the lease for a set time period and price.
Each type of extension comes with its own pros and cons, and the right extension for you will depend on your individual circumstances. For more information on the different types of extension we’ve got an in-depth look in our guide to extensions article.
Something to be mindful of is that if you would like a formal extension you’ll usually need to contact the funder around eight to six weeks before the end of your original agreement to ensure the paperwork is in place, as most will need the formal extension to be agreed before your final payment is taken.
Your Lease Payments May Change When You Extend
When you extend your lease agreement, whether it’s formally or informally, your initial rental payment is no longer considered as you’re now outside of the original lease period. This won’t have a big impact if you paid a regular monthly rental amount but if you paid more you might notice a significant change in the monthly amount. For example, on a 6+23 profile you pay the equivalent of six monthly payments upfront so more of the total lease cost which reduces the following payments. If you then extend the lease agreement this is no longer part of the calculation for how much your monthly rental will be so the price will increase.
For those looking at a formal extension, any change to your payment amount will be noted on your contract amendment and you’ll agree to this new rental price when you sign the extension. If you’re thinking of going into an informal extension, then you can request a quote for the price from your funder.
Payment Date Changing
Another payment related thing to be aware of is that your payment date may change. We wanted to highlight this as we know a lot of people will assume payments will continue as they had been but this isn’t always the case.
This will mainly apply to drivers in informal extensions, as they will go from being invoiced in advance or on their preferred payment date to being invoiced in arrears.
Again, if you have any questions about the payment date then the funder will be able to confirm these for you.
Your Warranty May Run Out
We know that one of the main perks of driving a lease car is that the warranty covers you while you have the car so you’re unlikely to be hit with an unexpected bill from the garage. Which is why we think it’s important for you to consider the warranty when you extend your lease.
Most manufacturers’ warranties only last for three years, or a certain mileage, so if you extend your lease beyond this and there’s a mechanical or electrical fault with the vehicle you will be responsible for the cost of repairing this, even if you have a maintenance agreement.
Our director Spencer Blake recently highlighted this as a potential problem brewing in the leasing sector with more customers choosing extensions over new leases. Our team is always on hand to help if you have any questions about extensions and how this will affect you with aspects like the warranty.
Mileage Allowance on a Lease Extension
When you extend a lease you will also increase your total mileage allowance, this will usually be done pro-rata based on your annual lease allowance.
If you’re going for a formal extension, then part of the process will be to confirm the mileage allowance and you can increase or decrease this based on your current mileage and whether you expect your needs to change on the year.
How to Extend Your Car Lease
If you’re looking to extend your current lease then you can easily do so by getting in touch with your current lease provider or if we helped supply the car then give us a call on 0330 221 0000.
Enjoyed this article? Read more of our latest blogs below:
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