In a recent article we showed five good reasons why car leasing is a good idea. Car leasing does make sense, however it may not suit everybody. We show why in this article.
Car leasing is, in effect, a way of renting a car without ever owning it, so as long as you keep up with the monthly leasing costs, you have a worry free use of that car as possible and just give it back to the leasing company at the end of the lease.
But lets look at some of the disadvantages:
You are tied to a contract
Car leases are mostly two or three years in length, though they can be for 12 months, or even less. You do sign a leasing contract, however, and are therefore bound by those contractual conditions.
So if you sign a two year car lease, then you are committed to paying the lease amounts every month throughout that term. You still have to pay the monthly payments, even if your circumstances change.
For most people that level of commitment won't be a problem, but what if you lose your job, or become ill or injured and can no longer work?
If you feel confident that you will be able to pay the monthly leasing costs, throughout the term, maybe because you have the money in a savings account already, then leasing should be considered.
If you are less certain about the future, or don't want to be tied to a contract, then maybe you should consider other forms of car finance.
Your car choices may be limited with car leasing
Car leasing companies often secure deals with dealers or manufacturers so they can get offer some amazing deals on certain cars, but will not have access to all makes and models.
So if you are looking for a particular make or model then you might struggle to find a car leasing company offering that car, although there are many leasing companies now so you have plenty of choice.
If you are less concerned about the exact make or model, then the limited choice presented by car leasing may be suitable for you, but if are more particular then you may have to consider other forms of finance.
Car manufacturers and dealers love you to buy optional extras because they are very profitable for them. Of course most people want at least a few additions to their car, even if they are going to lease it.
Car leasing companies generally charge the full cost of the option and then divide it by the number of months of the lease.
So if you buy optional satellite navigation for £1,500, then your monthly costs over a three year lease will increase by £41.
The trouble is that even though you have paid £1,500 for that sat nav, you don't own it either, as it is returned with the car at the end of the lease.
If you like having a number of optional extras in your car, then leasing may not be the best option, unless you upgrade to a model that includes the options you want as standard.
You don't own the car!
A benefit of car leasing is that you don't own the car. However this could be a disadvantage for others for these reasons:
- You have a poor credit history
As you will be credit scored by the leasing company, and credit impairment might count against you when trying to arrange a car lease. You might to need to finance your car with a specialist car finance company such as Welcome Car Finance
- Wear and tear
If the lease car has more than fair wear and tear at the end of the lease, the leasing company will charge you for it. If you have children or a dog, this could cause you additional costs at the end of the lease.
- High mileage users
Most lease costs are based on 10,000 miles per annum, although the leasing company will quote you for other annual mileages. If you exceed your estimated mileage over the lease or are a high mileage driver, then additional usage costs could make leasing an uncompetitive option.
- Pride of ownership
Lets face it, owning a nice new car is something we all aspire to. If this is a particularly strong feeling for you, then renting anything, be it a car or a property, is probably not for you.
- Very specific requirements
You may be unable to find a leased car that is exactly what you want, whereas buying it allows you to tailor it exactly to your needs.