What’s the catch?
There are a number of factors you should take into consideration when deciding whether to lease your next car:
Mileage: A leasing agreement provides you with a mileage allowance per annum. If you exceed this allowance you will be penalised. Let’s say your daily commute changes from 5 miles to 100 miles, you are bound by the agreement and will have to pay a penalty for each mile you exceed the allowance. A typical excess will be 7.2 pence per mile.
Damage: Any damage to the car will either have to be rectified before the end of the agreement or you will face having to pay a penalty. Most lease companies follow the BVRLA guidelines <a href=”https://www.bvrla.co.uk/service/fair-wear-and-tear-guides”>https://www.bvrla.co.uk/service/fair-wear-and-tear-guides</a>, which is a trade body regulating the vehicle leasing industry. The BVRLA put in place guidelines which describe what is considered fair wear and tear during the term of your lease. If someone scratches your car or opens their door on to it then you may be facing a bill to put it right.
Change of circumstances: If your plans change and suddenly your car can’t accommodate a new baby or you move abroad you may want to terminate your agreement. This varies from finance company but typically you’ll pay a hefty termination fee but only after you have satisfied a minimum number of payments.
Are these fees justified?
When you hand your car back the finance company will have calculated how much the car is worth based on the mileage and condition. If you hand it back with 50k miles instead of 20k miles on the clock or in a bad condition the car will not be worth what the finance company has forecast. It’s therefore worth considering that leasing a car offers very little flexibility.
It’s not really any different should you own the car yourself. A high mileage or badly cared for example will be worth less than a low mileage and well kept example when you come to sell. A lease is black and white with very little leaway.