When buying a car is not an option, the best alternative is to lease one. You can drive a vehicle of your choice without paying an incredibly hefty amount of cash or taking out an auto loan. The down-payment for leasing is surely less than the typical 20% required when one purchases a car. But how do you know exactly if leasing is indeed for you? If you agree with the following then it is the right option for you:
- You don’t mind returning the vehicle once the contract expires.
- You expect to lease another car down the line.
- You are confident that you can take good care of the automobile.
- You won’t exceed the mileage cap stated in your contract.
But just like any other decision in life that involves money, you also need to be smart before you sign anything.
Keep emotions out
Getting a car, whether through buying or leasing, is indeed a highly emotional experience. You may have already fallen in love with the vehicle you just test-drove, but to find out whether it is the right deal for you or not, you’ll need to keep your emotions out of the way. Remember that it’s a long-term deal and you wouldn’t want to spend years regretting your decision – think through everything and weigh all aspects before you seal the deal.
Run the numbers
Research, compare, and talk about the prices first. To determine what you can afford, consider your monthly cash flow, available savings, how often you actually drive, how long you want to keep the ride, and how careful you are with cars. A wise rule of thumb is that your monthly payment should not exceed more than 20% of your disposable income. Include the down payment, initial fees, taxes, insurance, and fuel costs in your calculations. If you think you can handle the numbers, it’s time to continue to the next step.
Consider your options
There are three types of car finance in the UK you can choose from: contract hire, personal contract hire, and finance lease. Contract hire is the most popular choice for VAT registered businesses, with one regular payment that covers everything for an agreed period and mileage. Personal Contract Hire (PCH) on the other hand, offers a fixed monthly rental amount with a fixed term and mileage, and is the choice of company car drivers with mileage allowance instead of a company car. It is also ideal for individuals un-attached to any corporate fleet. As for Finance Lease, it is good for businesses who want to manage the administration of their automobiles. Talk about these types in depth with your preferred vehicle leasing company to determine what is best for you, your lifestyle or your company, and your finances.
Pick several models
You now have a rough estimate of the costs and you know the finance type you’re going to choose. Thus, the next thing to do is know the model you can get, considering your own budget and your chosen car finance option. Make a list of the vehicle types you’d like to drive that are within your price range and discuss the list with your car lease company. Test drive each one of them, check their safety, and compare them to one another.
Much like when purchasing a car, negotiate the final price of your lease once you have a clear vision of the model you prefer, your finance options and available budget.
Overall, it pays to carefully consider your options when it comes to leasing a car. Educate yourself and make informed decisions.