If you are looking to buy a new or used vehicle, then one of the purchase options you may be considering is car leasing. But if you don’t know much about finance, it can be confusing, or even a little daunting. As the ethical lenders, Creditplus are committed to providing consumers with all the information they need to make the right decision about their car buying options. So here is the Creditplus guide to how car leasing works.
When you lease a car, you don’t technically own the vehicle that you are driving. Instead it is like you are hiring the car for the term of the leasing agreement. As part of the leasing deal, you will pay a fixed monthly fee to use the car each month. There are also other factors included that affect how you use the car, for example annual mileage limits – where you can only drive a set amount each year - and condition requirements – where you must maintain a certain standard of repair and cleanliness.
Because you don’t own the vehicle, you can change and upgrade your car more often than you might be able to if you had bought a car outright. Leasing costs are generally a lot lower than the cost of purchasing a vehicle outright. So while you may be paying an amount every month, when you add it all together it comes out less than you might have paid for the full price of a vehicle.
This means you can take advantage of changes to cars as the engines, entertainment features and safety systems improve over time. Meaning you can get more for your money.
In a car leasing deal, you do not own the vehicle. Instead, you are effectively borrowing the car from the lease provider. So you have to follow their rules for use, such as mileage limits, or you may incur a charge for exceeding their requirements. This is because once you have finished with the car, the leasing provider will want to sell that vehicle on again, so they want to ensure the value of the vehicle is kept as they predict. This is especially the case in a Personal Contract Purchase agreement, where the amount you are charged is based on the depreciation (amount of value) a car loses over the agreement.
A car leasing deal is usually assessed based on your credit rating, so it’s good to have an idea of what your current score is. You should be able to prove your income and may be asked to provide bank statements and pay slips as evidence. Before you start any car leasing deal, you should look at your budget and ensure just how much you can afford to pay each month. Remember to bear in mind any big changes in your life you have coming up, such as a baby, a change of job or moving house.
Creditplus are an FCA approved car finance provider with over 15 years experience in the car leasing industry. If you have a question about car leasing, your eligibility, or how it works, get in touch with one of our customer consultants and they will be happy to provide you with all the information you need to make the right choice for you.