Why you shouldn't be scared of leasing

There are many misconceptions and ideas about leasing that might dissuade drivers from taking a car on a lease agreement. However, providing you are aware of the conditions before signing an agreement and are comfortable with them, there's no reason why leasing can't be an ideal arrangement for the motorist who wants a new car but may not be able to buy it.

Let's address the issues, one at a time:

“It's more expensive than buying"

As you might expect, the cost of leasing depends on which vehicle you choose. A vehicle that is more expensive, and will depreciate more in value across the time of the lease, will cost more. Since you don't own the vehicle (see below), some might regard it as throwing money away, due to the fact that at the end of the term you don't possess the vehicle – much like renting a home. But, the amount you pay is based on a function of the depreciation of the vehicle over the time period of the lease and the rental of the vehicle, meaning that you're never actually paying for the vehicle's full cost.

It's important to realise that cars depreciate at different rates. For evidence take a look at this information from Autocar, which shows that Minis depreciate the least out of the UK's top 13 car brands. After nearly 35,000 miles a Mini loses an average of nearly 47% of its value, compared to a Toyota which loses nearly 75%. Note that this doesn't necessarily mean that a Mini is cheaper, because the actual value could depend on a number of circumstances and conditions.

Buying a car usually requires a much higher initial down-payment than renting – the latter might be several thousand pounds, while leasing could require an initial rental of three months' payment. The reverse side of this coin is if you decide that you want to end your lease early, by requesting an early settlement quote, you might incur penalties. This might be the remainder of the amount owed, all in one go – meaning that it might be worth sticking with your agreement and seeing it to the end.

For what you pay for leasing, there are also a number of extras that might be included, such as free delivery, a standard manufacturer's warranty, and even customisation of the vehicle in some circumstances. You can always set the parameters of the website to search by price rather than model, if you have a specific budget. A final fact to consider is that you can also pay to include maintenance, which will be a weight off your mind and wallet should problems occur.

“You don't own the vehicle"

That's true, and at the end of the three year lease you give it back to the lender

However, not owning the car might not be a disadvantage. Firstly, you may now wish to take up a lease option on another car, for a similar value if you wish, but one that is much newer. Your two/three/four-year-old car is returned to the lease company, and you move on to a new model.

So the advantages of a new car – no need for an MOT in the first three years, new technology, more efficiency and therefore potentially a lower road tax – can continue. Some drivers lease for 20-30 years or longer, simply because they like permanently driving a car that's new or young.

“You have a limited mileage"

It's true that vehicles on a lease agreement do have a limited mileage agreement, and there will be an excess mileage charge per mile if the driver goes over this agreement. The reverse is not true; any ‘unused' miles will not result in a refund.

However, this is not a hidden condition, so if you are aware of it when signing the lease agreement, it should not come as a surprise. Since the car is new, a driver should not have any problems keeping track of its mileage, with the odometer starting at a low value.

If you're concerned, then why not simply request a higher mileage limit at the beginning of the term? A simple calculation will show whether the cost of paying for a higher mileage allowance per month is worth paying out for – if unsure, ask the lease company to help.

“It's too complex"

Take a look at the website and see how complex it appears – it's actually fairly simple. Any lease company will give you the monthly rental, the details of the make and model, fuel type, the initial rental, and the chosen length of term. In reality it is no more complex than any other rental agreement for any other object.

Here's something else you may not have considered: if you're a growing business, leasing a vehicle might actually make things a lot simpler because you're not obliged to renew the lease at the end of its term. So, you can  review your vehicle choices without the complications of selling and buying them. It provides flexibility to a business that may expect to grow or move in the short term.

The rules around taxation are not quite as complex as one might believe, either. 

“You must return the car in perfect condition"

It stands to reason that since you don't own the car you must return it in a good condition, or else face excess wear-and-tear charges.If the car is in a condition that is 'commensurate with its age and mileage' you shouldn't have any challenges.