There’s a broad array of deals available if you want to acquire a vehicle, such as paying for a car outright in cash, paying with your credit card, going for a personal loan, a personal contract purchase, and so on. But there is one type of deal that has also gained a lot of traction in recent years: car leasing. Vehicle leasing or contract hire deals are a lot more popular now for their economic benefits and advantages such as no more worries about depreciation. But the devil is in the details, as they say, so it’s best to know what you can expect when you go for such a deal. You may have particular questions about how it works and what is involved, for example. Here are the answers to your top questions about car leasing: what you need to know.
1. How does it work?
Vehicle leasing or contract hire deals work just like property rentals – you can simply rent a vehicle for around two to four years, pay a monthly fee, and pay a deposit at the beginning. You can lease the vehicle from a financing or leasing firm or a manufacturer. The agreement and how much you will pay per month often depends on the make and model of the vehicle and your annual mileage, along with the length of your contract.
Throughout the contract, the vehicle will remain the property of the leasing provider, and when the contract ends, you will have to return it. When you return the vehicle at the end, the provider will perform an inspection and check for damages apart from the usual wear and tear.
2. What will happen if I miss one payment or more?
If you think you will have difficulty with one payment, you should get in touch with the provider right away. If your provider is aware of your difficulty, they can at least try to help you out by giving you a new payment plan. If you miss one payment without informing them, the provider will likely call you. If you miss several payments, they can classify you as in ‘default.’ They can then take the vehicle and you may receive a default marking on your credit record.
3. How much will I pay per month?
This is another question often asked by those who are interested in contract hire and car leasing deals, especially if you have a business and need a fleet of vehicles. The good aspect about these deals is that you just have to settle an initial deposit and then a monthly fee for a period, usually two years to up to four years. When you settle a higher deposit, your monthly payments can become lower as well.
If you choose a standard hatchback, for example, you can pay around £120 per month. The deposit would be approximately equal to 6 months or 9 months of monthly payments, so this would be from around £720 to £1080 if you opt for a 4-year contract. But regardless of the model you select, your main point of comparison should be the overall cost throughout the agreement – if the monthly payments are low, it may be tempting, but you have to consider the overall cost of the deal to know if it works for you in the end.