Car Leasing
If you are looking to lease a car it is important to understand how the agreement with the car leasing company will work. Before entering into any car finance agreement make sure you choose the best car finance plan for your circumstances. You can compare car leasing to other types of car finance using the car finance decider.
What is car leasing?
A lease is a flexible funding agreement between a leasing company (lessor) and a customer that funds the use, but not the ownership of a vehicle. The customer has use of the vehicle and, usually, the responsibility to ensure that it is properly maintained and insured, but never has the option to buy the vehicle outright as per other types of agreements.
The leasing company will remain the legal owner and registered keeper (on car log-book) at all times. The leasing company may decide to lease the car to a second customer when the first lease agreement has ended.
There are many variations on a standard lease agreement such as an operating lease, finance lease, contract hire and personal contract hire agreement. Always make sure that you read the terms and conditions before signing any agreement and ensure the agreement meets your personal circumstances.
How car leasing works:
Choose the vehicle that you wish to lease/rent.
Agree the term (duration) of the lease agreement – typically 2-3 years – and anticipated annual mileage. Agreeing the expected mileage over the duration of the lease agreement helps the leasing company to determine the likely future value of the car and therefore the repayments under your agreement.
The customer uses the vehicle for the agreed term and pays regular a rental amount to the leasing company.
Ending the agreement: What happens next?
At the end of the agreement, you will have paid for the depreciation of the vehicle over the term of the agreement plus interest.
The car is then returned to the leasing company. If the car has exceeded the agreed mileage then a pence per mile charge plus VAT will apply to each mile over the contracted amount. If the vehicle has not been properly maintained or serviced according to the terms and conditions of the agreement, or if the condition is worse than 'fair wear and tear', you may be asked to contribute towards these additional costs.
