Understanding How Car Leasing Works


Buying a new car is a big responsibility that you have to think about. It’s not just because you have to come up with the upfront deposit to get approved for a car loan, but there are also the high monthly repayments that could take as much as five years to finish. Car leasing is a good way of driving new cars without having to pay considerable amounts to car companies.

If you need a car to get around but are not too fussed about owning one, there’s always the car leasing option that you can opt for. It’s a car rental option that’s designed to be long-term, with a more budget-friendly monthly repayment scheme. All you need to do is stick within the agreed mileage and take care of the car while it’s in your care and return it after the rental agreement has finished.

You need to submit a down payment, which can be as less 20 percent of the car’s value that you are going to buy. And you have to pay fixed monthly amounts as per terms of the lease – after you are done with all the dues, you can either return the car to the leasing company or buy it by paying the residual value. However, there are strict rules and regulations for leasing a car that one has to follow.

Now, you might be confused about buying your dream car or leasing it. Well, both leasing and buying a car have their own benefits and disadvantages as well just like any other purchasing and renting stuff.

If you want to know everything about leasing a car briefly, you are in the right place. We have put together some major points that can help you understand how car leasing actually works. Let’s get started.

Leasing VS Buying a Car – A Brief Comparison

In simple words, car leasing is similar to renting; you can even get a new car every few years, without having to pay hefty amounts and deal with the complications of selling the car later. In contrast to leasing, buying a car means you are the legal owner, you are free to sell it or gift it to anybody when you don’t need it anymore. Also, if you are fond of changing your taste in terms of car models and cannot afford to buy every new model that comes out each year, car leasing is a great choice to go for.

Benefits of Leasing

  • No selling involved
  • Lower monthly payment options available
  • Lower down payment
  • Repairs are usually covered by warranty
  • One can get a new car every few years

Benefits of Buying

  • Ownership
  • Can modify car without worrying about voiding the lease contract
  • No mileage limits
  • Sell car whenever the dues are paid off

Related article: Top 5 Car Buying Secrets You Need to Know

Car Leasing Agreements Explained

Long term car rentals can run up to four years, depending on you, the car of your choice, and your lease provider. Another factor is your own decision about how long you’re willing to wait before getting another car.

If you’ve finally made up your mind and opted for a car lease, another decision you need to make is which car to go for. Of course, if you go for the executive range or bigger cars, the monthly repayments will go up as well. This is the reason why it’s important to get your research done before you take the plunge because you want to make sure that you can afford it.

Is the Price VAT Inclusive?

Long-term car rentals are mostly designed for business needs. If you look close enough, some of the deals you see do not have VAT in the quotation. When doing your research, it’s essential that you double check if the price quoted is VAT inclusive or exclusive. You don’t want to end up finding the car of your dreams only to realize that you can’t afford the monthly repayment because of the additional 20% VAT.

What’s Next After the Lease Has Ended?

After the lease contract has ended, you have two options to choose from: extend the lease or return the car.

If you opt for option one, you should get in touch with your finance company and ask about it. Check if they allow lease extension and if they’re kind enough to offer a discount on the residual value since it would already be a used and old car by then.

There’s also nothing wrong with choosing to return the car. If there are no damages and your mileage is within the agreed range, there’s no need to worry about extra fees. More often than not, the finance company will get in touch with you a few months before the contract ends to arrange the handover.   They usually collect the leased car for free, but it’s still best to contact them to confirm.

Following these steps can help you lease a car easily without getting into complicated procedures of car buying:

  • Choose the car that you want to lease. Once you have chosen your car type and model, next, you should take it for the test drive to avoid any future inconveniences. Keenly, observe the car for how its drive is; check its comfort, visibility, steering, shock absorption, and if there any internal noise issues to be worried about.
  • When it comes to owning a car, safety should be your primary concern as well – you should make sure that if it is equipped with anti-lock braking system (ABS), electronic stability control, and head-protection and side airbags.
  • Don’t just rely on a single car leasing company. You should check out a variety of them and then evaluate your budget and the deals offered by the dealers. Shortlist the best deals and review them again.
  • Summing up all these things, it’s time to negotiate the prices with the dealers. Keep it in your mind that the car leasing agreement will be based on the amount that both parties agree on. So, the better you are in negotiating, the better deal you can grab.
  • As you can face penalties on the late monthly payment, you should choose the deal that you can easily pay without having to pay any fines. If you pay a larger initial down payment, your monthly payment will be less.
  • Depending on the lease agreement, the leasing company also sets a mileage limit. For example, if you drive a lot, over 10,000 to 15,000 miles, you might have to pay extra charges for an extended mileage cap.

Final Verdict

If leasing a car seems easy and profitable then there are some consequences as well – like you should be ready to pay large upfront payments that include taxes, license fees, down payment, acquisition fee, security deposits, insurance, etc. But if you are not willing to invest all your savings on just a car, and would like to change it every few years, then leasing is the best choice.

Now, looking for cheap car lease deals is not as hard as it used to be. Thanks to the power of the internet, of course. Reputable companies can give you a good deal within your budget, so all you need to do is decide which car to go for.

You can check out this amazing guide book “Don’t Get Taken Every Time” for more information on buying or leasing your dream car in the showroom or on the internet.

Read Next: Is Car Leasing the Best Option for You?


Share this


Revolutionizing Electric Vehicle Charging: The Comprehensive Guide to 3-Pin EV Chargers

In the rapidly evolving landscape of electric vehicles (EVs), one crucial aspect remains constant: the need for efficient and accessible charging solutions. Enter the...

Top Car Races for Betting: A Guide to the Action

The roar of engines, the smell of burning rubber, and the thrill of unpredictable competition – the world of motorsports offers a unique spectacle...

5 Common Car Parts That Fail and How to Spot the Warning Signs

Cars are a wonder of modern engineering: thousands of components working together seamlessly, all just to make sure we can get to work and...

Recent articles

More like this