The cost of leasing a car varies from company to company, but is typically calculated based upon the retail price of the car and its estimated residual value at the end of the lease. In fact, the entire process is based on the difference between the retail, or sticker, price and the residual value after depreciation which is caused by age, mileage and condition. Bear in mind that cars typically lose 60% or more of their value after three years, so while leasing companies may raise the residual price to facilitate lower monthly payments, this also means that you will pay more if you wish to purchase a car outright at the end of a lease. Quality, reliable cars with high residual values are the best choices for leasing deals.

 Car Leasing

Leasing can be beneficial if you want to drive the latest cars and replace your car every two, three for four years, or if you want to drive a new, luxury car for business purposes. The fact that you are leasing a car, rather than buying it outright, means that your monthly repayments are correspondingly lower, so you may be able to afford to drive a car that would otherwise be outside your price range. Not only that, but when it comes to changing your car, you do not need to worry about depreciation, obtaining a loan to finance a purchase, etc. It is not uncommon for car dealerships to quote a flat interest rate, rather than APR or “Annual Percentage Rate” so that expensive loans appear less expensive. In any case, borrowing, say, £15,000 over 3 years at an APR of 7.8% still requires a monthly repayment of £468, whereas you can lease a BMW 5-Series Saloon, or a Mercedes-Benz C-Class Saloon for much less.
You may also need to consider if you want a leasing deal with maintenance cover over and above the manufacturer’s warranty included. This is often a good choice for business leasing because it allows the cost of repairs, etc. to remain fixed, month by month. It may, or may not, be suitable for private lessees who may find the cost prohibitive, particularly in comparison to the cost of organising and paying for repairs on an ad hoc basis.
Maintenance cover may be available as an optional extra, but one item that you will need to research for yourself is fully comprehensive car insurance. A leased car remains the property of the leasing company for the duration of the lease, so needs to be protected not only from theft, or damage caused by you or others but also from claims against you or the leasing company. If a leased car is written off, or stolen, this may constitute an early termination of your lease in the eyes of your leasing company. If this is the case and you do not have what is known as GAP or “Guaranteed Asset Protection” insurance – or similar insurance in place to cover the difference between the purchase price of a car and its current market value, you may be liable to additional charges. It is also advisable to obtain as many car insurance quotes as is sensibly possible and choose the one most appropriate to your individual needs and the requirements of the leasing company.