Best car leasing
A lot of people may not be able to imagine themselves having a BMW, a Mercedes, or an Audi car because their budget may not be strong enough to afford paying tens of thousands of pounds for these cars. However, you still have the opportunity to have one of these cars and try the feeling of luxurious driving for few years without breaking your bank account.
That’s by leasing someone else’s car. In the UK, cars that are available for leasing don’t only belong to companies, personal leasing is also a too popular option to consider with more than 1.6 people who are willing to lease their cars.
What does car leasing mean?
Car leasing is the same as renting but it lasts for a more length of time. You can lease a car for 2 to 5 years of time. A set fee is agreed up on at first when you decide on the vehicle for leasing. This fee relies on different factors including the model of the car, its current value, and its expected value after the due date of the leasing period. After considering other specifications that are combined to the leased car such as its color and interior technologies, a contract is tailored with its length, available annual mileage, and payments amounts.
After signing the leasing contract, you will leave an initial payment that is equal to few months. Then, a fixed amount is paid every month until the due date of the contract. In general, the value of the fixed payment relies on the length of the contract. The longer the length, the lower the monthly fixed payment.
When you return back the car after at the due date of the contract, it is checked over to know if you had exceeded the agreed mileage. If you did that, a little pence per every additional mile is calculated and then paid to leave you free to lease any other car.
Types of car leasing
After knowing how car leasing works, you need to know that there are two major types of leasing, closed-end leasing and open-end leasing. The type of leasing you choose is required by laws to be included in the leasing contract you sign.
This type is the most popular one in the market because it is usually used by normal customers rather than enterprises or fleet leases. The customer will only pay monthly fixed amounts that are agreed up on in the contract without having any financial risks at the due date of the contract as a result of drop in the market value of the released car. The leasing company will bear all financial risks. However, there is a limitation regarding the mileage. Once you agreed up on the number of miles, the company determines the residual value of the car. The residual value at the leasing time may be more than the actual current value but the purpose is to consider the decrease in value that will be left to the company at the due date. However, you will be offered a lower fixed amount to pay per month.
In contrast to closed-end leasing, open-end leasing contracts offer better allowance for the number of miles. But, the financial risk of a decrease in the value of the released car will be taken by the lessee. So, this type is not popular for normal customers but it is popular for enterprise. In this case, the residual value will be higher that it is on closed-end leasing contracts. So, at the end of the leasing contract, the difference between the market value and the residual value of the car will not be too huge to be afforded by the lessee. But, the fixed monthly amount will be higher than that of the closed-end leasing.
Which is better?
If you are a normal customer, you may by looking for a leasing contract that doesn’t charge you a lot of money every month. At the same time, you are not expected to drive for a long distances on a regular basis. So, the closed-end type of leasing is the best for you.
But if you need to lease a car for your enterprise, this car will be used for business rather than for a personal use. It may be driven by more than one person and for longer distances on a regular basis. So, restrictions that are proposed by the closed-end leasing will not fit you. You may prefer to pay a higher monthly fixed amount for an open-end leasing contract to benefit from the mileage advantage.
Example of car leasing
Let’s take an example to know how a leasing company may will charge you for leasing a car. If you are requesting to lease a car for 3 years. The company will measure 2 main elements, the allowed annual mileage and the monthly paid fees. Let’s say that the current value of the car at the leasing date is £30,000, the company estimates the market value of the car after running about a specific number of miles during the 3 years of leasing. Let’s say the market value would be £15,000 if you drive it for 30,000 miles.
At first, the 30,000 miles are allocated to the 3 years. So, you will have an upper limit of 10,000 miles per year. Exceeding this limit will expose you to additional payment measured by each additional mile you drive.
Then, the difference between the market value and the current value is used to determine your monthly payment. In this example, the difference is £15,000 (£30,000 - £15,000). You will be required to pay a fixed amount at first, let’s say £4,200. So, the remaining £10,800 will be allocated to 48 months (3 years x 12 months). That’s mean you will be required to pay £300 every month. But this monthly fees may be subject to additional interest expense calculated according to the money factor.
What maintenance could be included in leasing period?
When you lease a car from a leasing company, you should consider the maintenance that is included in the leasing package. There are different kinds of maintenance to be offered.
When you lease a car, you will agree to maintain its condition. Luckily most leasing companies include servicing in the leasing package. So, you will avoid the stress and cost of keeping the condition of the car as it should be.
Tyres are usually worn and torn when you drive the car for long mileage. Tyres maintenance is an additional service that is provided by most of leasing companies. Some of them may also replace tyres if the situation requires.
Changing oil is also included in the leasing package because many drivers care about the type of petrol they use for their cars but ignore changing oil. However, oil is considered the lifeblood for cars. The car engine may stop working if you didn’t change its oil on a regular basis. Being included in the package, you will not worry about this task.
Breakdown has no expected time to occur at, it could occur anytime. Being included in the leasing package let you avoid the risk of being caught by a breakdown somewhere without finding assistance. Regardless where you are if a breakdown occurs, a mechanic will be sent by the leasing company to fix the problem.
Brake pads checks and replacement
Keeping brake pads of the car at a good condition is essential, otherwise you will expose yourself to dangerous situations during driving. If brake pads are worn, it will be less responsive. So, they should be replaced for safety consideration and this task is included in the leasing package.