Factors to Consider Before Agreeing to Lease a Car
If you’re looking to lease a car, it’s important that you research thoroughly before you sign any sort of contract. There’s a lot that goes into car leasing that you may not be aware of, and there are several factors to consider before making your decision. From knowing what you’re expected to cover to understanding which kind of lease is best for you, this article aims to help you make an informed decision when it comes to leasing a car.
Car leasing is an accessible way for you to be able to drive a new model of car, and to even upgrade and enter a new deal every few years. And because you don’t own the car, you don’t have to worry about its depreciation. Below are a few of the key factors to take into consideration to ensure you’re making the right financial choice for you.
Understand the different types of leasing deals
There are several methods available when it comes to car leasing. It’s important to understand exactly what the differences are between these methods, and which ones will be more suited towards you.
Personal contract hire
Known as car leasing, personal contract hire is a type of leasing agreement whereby you sign a contract agreeing to pay fixed monthly instalments to the leasing company to drive a car of your choice. These agreements usually last between 2-4 years but this can be negotiated too. At the end of the term you can either re enter a new deal and upgrade to a newer model, or simply return the keys and car.
Personal contract hire offers flexibility and a wide range of benefits if you decide to go ahead with it. The benefits of car leasing is that your road tax will often be included within the monthly payments, and you won’t be charged any interest either. However, there is no option to buy the car outright at the end of the term like other leasing agreements can offer you.
PCP
Personal contract purchase, known as PCP, is another type of car leasing agreement that allows you to pay monthly repayments on a car of your choice like a personal contract hire agreement, but with some important differences. Firstly, you will be charged interest, with a fixed APR of 5%-10%. However, if you decide you want to keep your car and own it for yourself at the end of the term, you can make a balloon payment and do just that.
It’s important to consider which type of leasing deal is right for you and do your research beforehand. You don’t want to be met with any costly surprises later down the road.
Restrictions
With certain types of leases, there are often restrictions on things like mileage. It’s important to consider these restrictions and how often you usually use your car to decide which deal is right for you. Some leases will also restrict any modifications done to the car, so if this is important to you it's vital you take it into consideration too.
Know what you’re responsible for
Another key factor to take into account before leasing a car is understanding exactly what you’ll be responsible for. This way, you don’t get met with any unexpected costs at the end of your agreement. With many leases, you will typically be liable for any damage done to the car when it's in your possession, so knowing this is very important.
You also need to know if the type of lease you’ll be entering includes interest and road tax as well.
