Car buying can be an extremely exciting time, as you get to drive around numerous dealerships and try out a variety of different cars until you find the one that feels right and is great to drive. However, it can also be a time that’s annoying and to a certain extent, upsetting, as you struggle to find a car that fits your individual circumstances – and budget – whether you like the actual model or not.
There is always the opportunity to buy the car on a finance agreement, but even this can mean that you have to settle for a car that you don’t actually want but have to get because it meets most of your needs. However, whilst there isn’t a much you can do about car prices – even once you’ve haggled with the salesperson to reduce the price it can be still be more than what you were looking to pay – there is something that you can do in terms of the way that you buy the car and it’s something that you’re not likely to have considered previously.
Car leasing was once a way to obtain a new car that was carried out almost exclusively by large businesses. It allows companies to obtain a car without actually paying the full price. The way that car leasing works is simple and in its most basic form is just a case of one person leasing – or hiring – a car off a leasing company, paying them a monthly fee and handing the car back to the owners once the lease agreement has finished. Depending on the type of lease, it can be like one long car hire contract (e.g.; personal contract purchase), it’s been the perfect solution for getting company cars for years, as it means that the business doesn’t have to pay out the entire cost of the car and they can avoid up to 100% of VAT.
So how does this benefit an individual car buyer who can’t afford to buy a car?
Car leasing has become particularly popular amongst non-company car buyers in recent years. In fact, the Finance & Leasing Association recently stated that 57% of all car finance contracts provided by dealers to individuals in the UK in the first 6 months of 2010 were done with leasing contracts. Car leasing is growing in popularity because it is cheaper than buying with a loan (which requires you to repay the full amount) and is a lot less onerous – for example, at the end of the lease contract you hand the car back and get a new one and don’t have to worry about selling your old vehicle.
It is cheaper than car buying because you don’t actually own the car and you don’t have to pay for its full value. For example, if you buy a £20,000 car with a loan, over 4 years you could end up paying around £610 per month and with leasing the same car could cost as £350 pounds a month. For a £10,000 car it could be as little as £150.
And if you want to actually buy the car? Simple – most some leasing agreements give you the option to pay an agreed amount of money (a balloon payment) once the lease has finished which will act as a final sale payment, meaning the car will be completely yours.
Car leasing may not be something that you’ve looked into in any great depth in the past, but if you have a good credit record and you’re considering buying a car and can’t afford to do so outright with cash or you want to avoid paying large monthly payments car leasing maybe an alternative for you. However, before signing any agreements always be sure that you have shopped around and compared deals based on the same terms (same contract period, mileage etc) and be sure that it is correct for you and that you fully understand the lease contract. Also, be aware of the disadvantages of car leasing such as the fact that there is a restriction on the number of miles you can drive per month and if you exceed the agreed amount you may have to pay an excess mileage.