Much has been written over the years about leasing a car as a viable alternative to purchasing it outright. That it’s a very useful option, there can be no doubt, but like the purchase of absolutely anything nowadays, comes with its own unique ‘pros’ and ‘cons’.
It’s fair to say that the financial aspect is by far the biggest incentive. Leasing a car means out of pocket expenses are lower, as it doesn’t normally require a lump sum up front, a balloon payment at the end of the lease, or the financing of any applicable extra warranty.
This eliminates paying for the car and any depreciation otherwise encountered from the eventual sale of the vehicle. It also allows for the ownership of most models – from runabouts to luxury models – at a fixed and manageable monthly cost.
The main downside you have to overcome is mileage. Lease cars tend to come with a fixed mileage, which can be costly if you suddenly become a high-mileage driver, and you will be obliged to return the car in very good condition after the leasing period is over.
Possibly the only “positive-negative” in the motoring world is that you have to be prepared to change your car after a set number of years – usually three or four – leasing is not suitable if you like to keep the same car for six years, or conversely, if you like a new car every year!
You also have to check the tax ramifications carefully – for example the costs of leasing can be deducted from taxable profits as expenses when the car’s CO2 emissions fall below 130g/km; however, capital allowances can be claimed only if there is an option to purchase the car.
Often overlooked when leasing a car is the type of driving you intend to do and where you live in relation to your main work location. Obvious as it may sound, it is sometimes forgotten.
The monthly cost between equivalent manual and automatic versions of the same car can sometimes differ, so if you are someone who is likely to sit in heavy traffic daily, it might be worthwhile considering an automatic.
If you regularly travel with ‘goods’ in the car, is there a case for an estate version over a saloon with a large capacity boot, or do you need the security of a separate boot compartment?
Does the type of business you are in affect the insurance grouping for your car? The difference in cost between the basic (yet probably quite adequate) model version and that with all the extras can make a big difference to your insurance costs. However, leasing does open up the possibility of owning a far more prestigious car than you might otherwise have been able to afford to buy outright.
Although not affecting you in the same way as it would when buying a car, depreciation does have an influence on leased vehicles. We have all heard the tale that some cars can lose thousands of pounds from their value once you take ownership and have driven 200m from the showroom. Leasing factors depreciation into the payments form the word ‘go’, so cars that are known to hold their value well make a good option to consider.
The main thing to consider when leasing a car is that you take reputable and reliable advice before you sign on the dotted line.