What are the Extra Costs of Car Leasing?
Many people lease out their car as it is a cheaper alternative to comparing car finance deals and purchasing the same vehicle. However, when choosing to lease a car you have to be aware of the fact that your fixed monthly repayments won’t be the only thing you’ll be paying for. There may be extra costs that you’ll have to be aware of.
In this guide:
Before you Lease:
Unfortunately, there are extra costs sprinkled throughout the entirety of a lease contract. There are three big costs involved before you enter your car lease. Most leases exclude VAT, deposits and administration fees.
VAT actually costs around £240 a month if you’re buying as an individual. The price of a deposit is normally the same price as a monthly repayment. You can negotiate the price you pay for your deposit, but the lower your deposit, the more you end up paying a month on your lease. Administration fees vary between brokers, but you’re most likely looking at around £300, not included in your monthly repayments.
Let's say the car you want to lease has a monthly repayment of £170 a month. Before you even properly start your lease you’re looking at paying £410 a month because of VAT. Not to mention the extra £470 you’ll have you’ll have to pay for your deposit and administration fees.
During Your Lease:
These extra costs aren’t really a surprise, but you’ll still need to consider them as additions to your monthly payments as they’re all outgoings on your car.
You’ll have to keep up with maintenance checks with your car. They’re mandatory for leased cars, so make sure you budget with this in mind. These checks are determined by the age or mileage of your car. The younger your car the less often you’ll have to have it checked. Also, be aware that the price of maintenance checks depends on the model of your car.
Something you’ll also need to consider is the price of petrol against diesel. While diesel costs more, it lasts longer than petrol. And petrol has super refined versions of itself, making it cleaner to run. Either way, you’ll have to have to factor in the price of fuel to your monthly budget.
Insurance is one of the only things you can really save money on as it’s your choice where you get your insurance from. Comparison sites are a must when looking into insurance. As long as you have the amount of cover that suits you then you’re in to save some real money.
At the End of Your Lease:
There are a couple of end of lease costs that you may have to pay if your car is damaged beyond normal ‘wear and tear’. Your broker will always give you guidelines on what classes as wear and tear. If there is excess damage then you’ll be responsible for the repairs before returning the vehicle at the end of your lease.
You’ll also get charged for the excess mileage, so no needless driving.
Some major advantages of leasing a car are that you get to drive a new car. It’s also often cheaper than getting a car finance deal. Most leases only last for two to three years on a new car, during which time it shouldn’t need a lot of maintenance work due to the age of the car.
One disadvantage of leasing a car is that you’ll never own the car. You’re putting in all this money and you don’t get to keep the car at the end of it. The lease itself is fairly restrictive - for example you’ll have to pay a substantial amount if you want to hand back the car before the end of your contract. You’ll also have to pay any damages to the car at the end of your lease.