Leasing, rather than buying, a car is becoming an increasingly popular option as drivers want new cars at what appears to be a lower cost.
In fact, so popular is the leasing option that, according to the Financial Times, Great Britain accounts for more than twenty per cent of the European car finance market, which stands at more than three hundred and fifty billion euros.
But there are some pitfalls that you should avoid and some considerations to make before you sign on the dotted line.
Deposit
All leasing deals require a deposit payment. Deals are often advertised with low monthly payments, but when you read the small print the deposit is huge. That deposit pays for a proportion of the car lease upfront. But what happens if you drive your new car off the forecourt and straight into a crash? While the company you leased the car from will be reimbursed by the insurer, you, on the other hand, will lose the majority of your deposit. Fifteen hundred to two thousand pounds is recommended as the maximum deposit you should pay.
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Mind the Gap
As well as your normal insurance you should also invest in gap insurance. This will cover the drop in the value of the car as you drive it off the forecourt.
Be Sure About Your Mileage
Most car leasing deals are based on a maximum annual mileage, and there are penalties to pay for exceeding the mileage in your contract. While this might seem like it doesn’t cost that much, it can soon rack up even if you’re only doing a few miles more that the limit.
Looking After the Vehicle
When you hand the car back, it will be subject to detailed scrutiny, checking for any damage that goes beyond general wear and tear. Small dings here and there could really end up costing you. What is classed as excessive damage varies between dealers, so check the small print before you sign up.
Don’t Lease Longer Than the Warranty
To keep leasing as a cost-effective option you should always make sure your leasing period is the same or less than the warranty period. This will ensure you don’t end up with large bills for maintenance.