In the United States, a majority of drivers have been leasing their vehicles for years. In the UK, the growth of car leasing has been relatively slow, but recently, more drivers have taken car leasing deals to buy a vehicle outright. One main reason for this may be that the concept behind car leasing is changing – it is now increasingly seen as a more viable arrangement, not just finance-wise, but convenience-wise as well. The fact is that when you lease a car or vehicle, you will not have to deal with its depreciation, which is inherent. At the end of the lease deal or contract hire, you can simply return the car to the provider and choose another model if you so choose. But what else should you learn about car leasing and contract hire? Here’s what you really need to know.
How does it work?
Leasing a vehicle is much the same as hiring a vehicle for a day, say, or a weekend. It’s just that with leasing, you will rent or lease the vehicle for a much longer period at a fixed price. You will then settle this monthly payment for the vehicle for the duration of the contract hire and leasing agreement.
With vehicle leasing, you may have to go through a credit check, but the check will not usually examine your other expenses or outgoings to be sure you can afford the monthly payments, so it’s easier to get approved for it compared to getting a loan for buying a car.
More details for a contract hire or lease agreement
- Contract hire or lease deals can last from two years up to five years, depending on the provider.
- You have to settle an initial deposit, usually equivalent to three months’ rental for the vehicle you choose.
- You will never be the owner of the vehicle and will just hand it back to the provider at the term’s end.
- You can avail of a car lease deal with a maintenance package, which can take care of servicing, roadside assistance, and road tax for the vehicle.
- You have to be aware of the terms and conditions of the agreement, and one of the most important terms is the mileage limit. If you exceed the annual mileage limit, you will have to pay an additional fee. The additional fee is usually computed as 10 pence for every extra mile, so you should understand your mileage and understand the expenses associated with going over it. Here’s a tip: if you drive a lot, it may be better to go for a higher mileage limit per year; it comes with additional charges, but it may be cheaper than paying the penalty fee.
- Other conditions include not being able to modify the vehicle in any way. You cannot, for instance, add a tow bar or other component without asking permission from the provider. You can, however, ask the car leasing provider if they can make changes or modifications to the vehicle before you get it.
- At the end of the vehicle lease agreement, you have to return the vehicle in good condition, but this considers normal wear and tear. If, for instance, the wing mirror of the vehicle is broken, then you may have to cover the expense of repair for this.
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