What is Car Leasing?
Buying vs Leasing
Now more than ever people are looking at lease as a method for driving their next car. It allows you to change your car on a regular basis without losing thousands of pounds and simply by doing this you’re able to benefit from some of the most up-to date technology and emissions on a regular basis. You will also avoid frequent servicing trips or MOTs as the car will always be fresh off the production line. Leasing’s overall cost-effective payment plan is one of the biggest reasons people turn to leasing, coupled with crippling depreciation the fact that should you decide to buy a car - as soon you drive that vehicle off the forecourt it is an asset losing money. With leasing your fixed monthly payments will pay for the use of the vehicle over an agreed term; usually 24, 36 or 48 months. In a standard Contract Hire agreement, you will never own the vehicle and at contract end you simply hand back the keys to the finance company. It really is that easy.
Few people are able to buy a new car outright without some form of financing, but even those that do will find that they will have lost a significant amount of money if the vehicle is changed within a short period of time. Changing the car you drive every 2 or 3 years, as you are able to do with leasing, will result in a massive financial loss. Leasing allows you to change your vehicle at regular intervals without ever suffering from depreciation.
Many people choose some sort of finance if they’re to buy a new car and while many of these options may be common, that’s not to say they don’t come without any negatives or disadvantages. For example, dealer finance and personal loans can present serious excess costs should you wish to change the car within the first 2 or 3 years – with many of those choosing this form of payment finding the end settlement figure significantly higher than trade-in value creating negative equity and a serious issue for many drivers. Both leasing or contract hire allows you to avoid this and its structured payment plan is regarded as one of the most simplest and cost-effective forms of driving a new car.
Buying vs Car Leasing Example
Its no secret that buying a new car has been the norm for many motorists over the years and its a process that many are familiar with, in contrast leasing’s growing popularity makes it a relatively new method of driving a new car. For this reason its worth comparing the two and seeing the sheer amount of benefits that leasing a vehicle can offer. For instance, if you choose to buy a £20,000 car; after 36 months this may have a resale value of £13,000. If you chose to lease the car, you will pay the £7000 difference over the 36 months (likely including an initial payment followed by a series of monthly payments) If you were to buy this outright you would be faced with the daunting option of paying the £20,00 price upfront plus any additional maintenance and servicing. If you choose a finance plan such as a loan you could face further finance charges over the course of the 36 months and are still left with an asset that has lost money. After the 36 months have elapsed, instead of handing the keys over to the finance company and leasing a new vehicle, you will be forced to take the hit of the depreciation and are left in a financially disastrous cycle if the car is changed regularly.