If you want a brand new vehicle to drive around in, there are several ways you can acquire one. You can purchase it outright with cash (the best deal out there, but not very realistic for most of us). It also allows us to choose financing options such as a personal loan or a credit card. You can also select a PCP (personal contract purchase), hire purchase, or personal contract hire deal, also known as PCH. Of course, each deal will have its pros and cons. But there is something about vehicle leasing that has made it a more viable option compared to most. If you have an interest in vehicle leasing and would like to find out more, then follow this post. Here’s what you should know about vehicle leasing: the top aspects to remember.
The basic facts
A PCH deal is exactly how it sounds – it’s effectively the long-term rental of a vehicle. In most cases, PCH agreements are lower in monthly cost in comparison to personal loans and other financing options. It is also important to note that the process is not as complicated as other options, either. All you have to do is settle an upfront payment (equivalent to about three to six months of the monthly rental). Then pay the leasing firm the agreed-upon monthly fee while you use the car for a certain period.
Once your agreement with your leasing provider ends, you can give the vehicle back. But remember that you will have no option to purchase it. It has been confirmed by reliable and experienced leasing providers like Diamond Contract Hire. Your leasing agreement will also have a mileage limit, so your leasing fee will be costlier if you opt for higher mileage. It’s better to set your mileage limit a little higher at the onset. It is because if you go over the limit when the agreement ends, the penalty you need to settle may range from 5 pence to 10 pence per extra mile. When your contract ends, you should also return the vehicle with no damage. Maximum it could be just with just the usual wear and tear, or you may face additional fees.
Always negotiate the cap price – bargain is the right thing to do!
The cost of the vehicle that you want to lease is known as ‘cap cost.’ And for your own benefit, you want it to be as low as possible. Lessees assume that as they’re not buying the car, they don’t have to worry about the base price set by the manufacturer. Using bargaining skills will help to reduce the overall amount for the monthly repayments.
Most of the people leasing a vehicle also don’t know the final agreement price determine the monthly payments. Ask the dealer that you are open to a fair deal. But again, as you are leasing a car, you are not going to pay the full price.
Don’t forget to have gap insurance
In most of the cases, lease contracts have Guaranteed Asset Protection or gap insurance. Gap, as the name goes, it fills the vacant space in conventional automobile insurance. Gap also refers to the difference in what the person owns on the vehicle’s lease and value. At the same time, it also protects the lessee if the car is totaled. This happens by paying the outstanding difference between the actual cash value of the car and the remaining amount. So, before you avail car lease, make sure to ask whether it includes gap insurance coverage.
The top advantages and considerations
The advantages of vehicle leasing are quite clear. You can have lower monthly fees for using the vehicle compared to other deals. Also, you can drive around in the latest new model without worrying about its depreciation. Your term doesn’t last for too long, and at the end of it, you have an upgrade to another new vehicle. You can have a new car to drive around in every few years!
However, you do have to consider that a vehicle lease deal is mainly limited to newer vehicle models. At the same time, you will have to contend with damage charges and payments if you exceed the mileage limit. You don’t have the option of owning the vehicle. But this also removes the responsibility of ownership from you onto the hands of your leasing provider.
Let’s have a look at some other advantages of leasing a vehicle.
Lower monthly payments
When you lease a car, you have lower monthly payment options in comparison of the rates for buying a new car. The monthly payment of the vehicle on lease depends on the residual value. Residual value is the overall estimate of the car that one needs to pay while leasing it. If the car has a higher residual value, the monthly lease payment will also be lower.
Low maintenance costs
Another good thing about leasing a vehicle is that manufacturers often offer a warranty in most cases. Then when you have the warranty, most of the maintenance repairs are included in it. This clearly means that you need to invest less amount from your pocket for the maintenance of the vehicle. Be it a regular tune-up or oil change, or some serious repair, the overall expenses will always come under the warranty.
Minimum amount upfront
When you lease a car, you need to pay minimum upfront in comparison to the cost of buying a new vehicle through a car loan. The good thing is that when you lease a car, you do not need a down payment. But even if you need to do so, the amount will always be lower. If you want to save even more, make sure to negotiate the price. In some cases, lease contracts are not set in stone. This means that you can persuade the dealer to create a contract that works for you.
Having more options
Though this seems obvious, but leading a car offers more options to choose from. Leasing contracts last for some years, and you can get to try new vehicles in less than 2-3 years. But here’s a thing of caution – if you are someone looking forward to drive a new vehicle, leasing is not the right option for you.
Business leasing is available
While PCH is popular, business vehicle leasing is also readily available. Contract hire deals are more advantageous for businesses, partnerships, and sole traders because you can off it on tax returns. You can lease everything from cars to vans and taxis. However, leasing agreements are more often available for new vehicle models in comparison to second-hand ones.
Final Words
If you want to make an investment in automobiles, check whether leasing is the right option for you. Of course, you will have ownership of the car in the end, but you will remain responsible for the damage to the fleet. Some modern companies also have in-built rental management software, and these offer real-time data on mileage, fuel, and maintenance. This will also automate the lease process and only when the initial contract is going to terminate soon.
So, now that you are aware of the all-important factors for leasing a car, make sure to take the right decision. Never be in a hurry and make enough considerations.
