Some say that car leasing is a waste of money because you will never own the car. But just like listening to music on Spotify or watching movies on Netflix, car leasing is a decision based on convenience. As the cars are usually brand new, there is very little maintenance and upkeep to manage as they won’t require a MOT for the first three years. Road tax is usually included, and you get all the latest tech and safety features too. After your agreement is finished you can get a brand new car again, without the worry of depreciation or selling the car.
When car leasing was first introduced several decades ago, it was popular with large businesses with hundreds of vehicles. Leasing companies would get good discounts from the manufacturers for buying so many cars at once, and from the early 2000s, car leasing became more commonplace for consumers looking for these savings too. Today personal contract hire (PCH), the actual name for consumer car leasing, is gaining popularity. Car leasing is absolutely available to the public, but good credit scores are usually necessary.
As car leasing is effectively a long-term rental, the leasing company is the owner of the car. Because of this they expect their asset to be in good condition when it’s returned. Nevertheless, they expect that after a few years the car won’t be in showroom condition which is why most will adhere to the BVLRA Fair Wear and Tear policy. If your car is within these unbiased guidelines when you return the car there will be nothing left to pay.
The cost of leasing a car is derived from how much the car will depreciate whilst you drive it. One of the major contributors to depreciation is mileage, so leasing companies will ask you to agree the mileage at the beginning of your term. This can be anywhere from 5,000 miles a year to well over 30,000 miles a year – the monthly price will of course reflect this – but as long as you estimate carefully and stick to this limit there won’t be any excess mileage charges.
At the end of the agreement, you return the vehicle to the leasing company and if you’re within the mileage limits and condition policy then there is nothing left to pay. Balloon payments are a feature of personal contract purchase (PCP), not car leasing. Lease companies very rarely allow customers to buy the car at the end.