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If you’ve never leased a car before, you could be forgiven for thinking it’s a daunting experience. In actual fact, it’s one of the simplest ways to get to drive the car you want.
However, it always makes life easier if you know what to expect. So we’ve put together some first time car lease tips guaranteed to help you on your journey.
Understanding how car leasing works
Car leasing is a way to spread the cost and drive the vehicle you want without having to pay for the whole car’s value. It works like a car rental, but over a longer period of time.
With a car lease, you sign a contract agreeing to pay a monthly amount in exchange for the full use of a new vehicle over a set period of time.
At the end of the contract, you hand the car back and walk away. You’re then free to start a new contract on another car if you wish.
As you never own the car, your monthly payments cover only the depreciation during the period you have it.
This means the payments are typically significantly lower than other types of car finance such as hire purchase.
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So, on with those first time car lease tips…
Tip #1: Set a budget
Knowing exactly how much you can afford to spend every month on your car lease will firstly help you decide which car to choose, and secondly ensure it’s affordable, meaning a lot less stress later down the line.
There are two main figures you need to consider when calculating how much you can afford to spend – the initial payment and the subsequent monthly payments.
Initial payment
Your initial payment works a little like a deposit on car finance. The more you put down at the start, the less your monthly payments will be.
Options on leases are fairly flexible – depending on the contract terms, it can be anything between one to nine months’ payments upfront. For your convenience, all our lease deals also come with a £0 deposit option if needed.
Monthly payments
Your monthly payments mainly depend on the total value of the lease minus any deposit you put down.
However, mileage also plays a part here. Which brings us to the next point…
Tip #2: Estimate your mileage
With a lease, your estimated annual mileage is taken into account. This is because mileage plays an important part in calculating the depreciation of a vehicle.
If you take into consideration that your monthly payments cover the depreciation, it’s easy to see why the more miles you do, the more you’ll pay – as the vehicle will be worth less when you hand it back.
If it’s your first time leasing, it can be easy to overestimate your mileage as you don’t want to pay any extra for going over. But similarly, underestimating your mileage can end up being a costly mistake. So it’s important to be realistic.
One of the easiest ways to calculate your mileage is to take the number of miles you drive each week and multiply it by the 52 weeks of the year.
It’s unlikely you’ll drive every day or even do the same amount of miles every week, but this will give you a good ballpark figure.
Add an additional 5% on for yet-unplanned future trips just in case, so you have some leeway.
Tip #3: Always choose an approved provider
There are a lot of lease providers out there, and you should choose one based on your situation and what car you want to lease.
However, first and foremost, you should check that they are an approved provider.
To guarantee a safe experience, look for the following when considering a lease company:
Only use an FCA regulated company
The Financial Conduct Authority (FCA) regulates the financial services market to protect consumers and enhance market integrity.
Your lease company should be authorised and regulated by the FCA. You can usually find their FRN number – a unique identifier assigned to every firm, individual or other body regulated by the FCA – on the company’s website or literature. For example, our FRN number is 658076.
If not, you can search the FCA register using their name or postcode.
If they’re not FCA regulated, then it could be very risky arranging a lease through them.
Check they’re a BVRLA member
The British Vehicle Rental & Leasing Association (BVRLA) is the leasing industry ombudsman.
By leasing from a company that’s a member of the BVRLA, you have the added assurance that the company will adhere to a professional code of conduct.
If the leasing company is a member of the BVRLA, it’ll display their membership details on the BVRLA website.
Look online
A little online research goes a long way. Look for customer reviews on independent review sites, such as Trustpilot to get an accurate, impartial idea of the leasing company you’ll be dealing with.
Tip #4: Insure your lease car
A lease contract can often include many different things, from road tax to the manufacturer’s warranty. However, insurance is generally not included.
Before you lease the vehicle, it’s important you check which insurance group it falls into to ensure the payments fit into your budget.
Typically, you need comprehensive cover with a lease car. This will cover you if you damage the car, or damage someone else’s. It’ll also cover you if the car is stolen or written off.
Remember, legally, you must have car insurance in place for your leased car before you drive it away from the dealership.
Tip #5: Consider GAP insurance
GAP insurance (Guaranteed Asset Protection) covers the difference between the amount left on your lease and the amount an insurance company would give you if you car was written off or stolen.
It’s not a legal requirement. However, it can provide reassurance that in the event of theft or a write-off, you’ll have a payout for the residual value that’ll cover the rest of your payments and not leave you out of pocket.
Tip #6: Check the car
It stands to reason that if you were buying a car, you’d check its condition first. The same applies with a lease.
The delivery driver will walk you around the car to inspect for damage, as well as checking out the interior and documenting any issues you spot.
Make a note of the mileage and double-check that any promised extras – such as a tyre repair kit – are inside the car.
At the end of your contract, the lease company will do a full check on your car, so it’s important to be aware of any issues upfront.
Tip #7: Decide if you want to include a maintenance package
Many lease deals allow you to choose an optional maintenance package. This is a set charge that’s rolled into your monthly payments and means you won’t have to bear the cost of any unexpected repair bills while you have the car.
Usually, maintenance packages include service costs, breakdown assistance and basic repairs and replacements.
It’s a good way to factor maintenance costs into your budget, but make sure you check to see what’s included in the package before you decide.
Tip #8: Beware of hidden charges
Much like any financial agreement, it’s important to know all the ins and outs.
Check there are no hidden charges tucked away in the small print, such as administration fees or additional delivery charges.
If you’re not sure, don’t be shy – ask!
Tip #9: Know your lender
Just as you need to be aware of any hidden charges, if you go through a broker it’s important to know which finance company you’re dealing with.
Go into any financial deal with your eyes wide open and get as much information as you can.
Hopefully these first time car lease tips have given you a clearer picture, but if you’d like to find out more about leasing, the Hippo Leasing team is happy to help. Visit their website for more information.
This article was originally published on the Hippo Leasing website. All images from Hippo Leasing.
