The Benefits of Leasing a Car : Vehicle Save

The Benefits of Leasing a Car

Car leasing, already popular in the USA, is catching on in the UK too. So what are the benefits of car leasing and why should you consider it ahead of buying a car outright?

Why car leasing makes sense

Oil baron Paul Getty was once quoted as saying "if it appreciates, buy it. If it depreciates, lease it."

Whereas when you buy property its value often increases, this is rare in the case of buying a new car. From the moment you drive a car out of the showroom it starts losing value, with the bulk of new cars losing around 50 per cent of their value after three years. So effectively, by buying a new car outright you are paying for something that is instantly depreciating.

By contrast, if you lease a car you avoid reselling it at a loss - instead you simply use it for the length of the leasing term, which is agreed at the outset and pay by set monthly instalments. Generally, with a lease agreement you make payments based on the difference between the retail value of the vehicle and its residual value (what it is projected to be worth at the end of the lease term). This means that cars that are slower to depreciate, thus retaining more of their value, are typically more cost effective to lease than cars that depreciate at a faster rate. Once the term is over you can either walk away, or, if you have a personal contract purchase agreement, you may be able to buy the car with a final lump sum payment.

What are the benefits of car leasing?

There are many reasons to consider car leasing, including:

1. You may be able to drive away in a car that would otherwise be out of your price range. In fact, many premium cars are the best suited to car leasing as they hold their values well over the initial two-four year period that a lease agreement lasts for, which brings costs down.
2. Monthly payments are generally lower than those on a car loan. Typically, leasing costs 35-55 per cent less each month than a car loan and only a small deposit is necessary - typically in the region of three monthly payments. In addition, buying a car with a car loan or car finance may mean that you end up owing more than the vehicle is worth.
3. Most leasing deals incorporate car maintenance as the warranty expands to cover the lease term (although you should check that this is the case). Road tax may also be covered in the leasing price.
4. Your motoring costs are fixed for the term so you don`t have to worry about fluctuating interest rates.
5. With leasing, you can hand back your current model and take out a new agreement without the worry of selling the existing vehicle and finding the additional funds to facilitate the purchase a new one.

What about insurance?

If you decide car leasing is right for you then don`t forget that you must arrange your own comprehensive car insurance - just remember that when you insure the vehicle you need to declare that you are the registered keeper and not the registered owner of the vehicle; this is because the car still belongs to the lease company.

There are many ways to bring down car insurance costs including agreeing to a higher voluntary excess, agreeing to a mileage cap, parking the vehicle in a garage overnight and paying premiums annually instead of monthly to avoid interest charges. Also remember to compare cheap car insurance with a comparison website to ensure you`re receiving a competitive deal.