The Most Common And Costly Mistakes People Make When Leasing A Car
Car Leasing is one of the best ways of financing a new car or van for both business and personal users as it is cost-effective, tax-efficient, and enables you to easily budget for all your motoring costs.
However, if you don’t do your homework and plan ahead, and think about your specific requirements over the term of the contract, what starts off as a dream deal could turn into a Car Leasing nightmare!
1) Not Comparing Like-for-Like Quotes
This is probably the biggest car leasing mistake people make. If you obtain more than one car lease quote for your new vehicle, which I encourage you to do, you must request exactly the same vehicle specifications and contract terms from each quote provider. If not, you’ll find that what may appear to be a competitive quote does not include everything you need, and could prove costly later on.
The main things to check are initial rental required, whether Road Tax is included for the duration of the contract, the annual mileage allowance, whether all your requested options are included, whether Car Leasing Maintenance is included, if there is an administration fee, and whether VAT is included in the quoted rental.
2) Not Using A Car Leasing Broker
Some people make the mistake of just going to their local Main Dealer and asking for a car lease quote, which could result in their paying much more than they need to. This is because most Main Dealers can only obtain quotes from their own manufacturer’s finance company, which is not always competitive.
Alternatively, a good Car Leasing Broker deals with a number of independent finance companies and will shop around the market to find you the best deal. There may be occasions when the Main Dealer has a special offer (which is usually subsidised by the manufacturer or finance company) but, in most cases, a Broker should be able to offer you a better deal and will probably give you a better personal service.
3) Not Selecting The Right Annual Mileage Allowance
Many people receive a nasty surprise at the end of their contract when a bill arrives for Excess Mileage Charges. You should always try to estimate as accurately as possible the annual mileage you will cover in your lease car, and this will be written into the car lease contract and reflected in the rental. Don’t be tempted to go for a lower mileage than you are likely to cover, in order to reduce your monthly payments, as it will be more expensive in the long run.
4) Not Adding Full Maintenance To Your Car Leasing Contract
By adding Car Lease Maintenance to your contract, you have peace of mind in the knowledge that all your servicing costs, repairs and replacement tyres will be paid for by the finance company, and your motoring costs will be fixed for the duration of your contract. This works out cheaper than paying for servicing and repairs as needed, as the finance companies buy these services ‘wholesale’ and you are protected against future price increases in parts and labour.
Furthermore, you can be sure your lease car is being kept in peak condition, and there is less chance of you falling foul of Fair Wear & Tear and De-Hire Charges at the end of the contract. So, it’s false economy not to include Car Leasing Maintenance in your contract.
5) Not Taking Out GAP Insurance
It could prove very costly if your lease car is written off and you don’t have GAP Insurance. GAP Insurance indemnifies you in the event that your lease car is the subject of an insurance write off, where the claim settlement by your motor insurer is less than the termination charge applied by the finance company. It is not included in your Fully Comprehensive Car Leasing Insurance Policy.
If your lease car were to be written off or stolen (and not recovered) during your contract period, even if it’s entirely the fault of a Third Party, you would have to settle the finance agreement with your leasing company, who will provide you with a settlement figure at the time of the loss.
Your motor insurer will pay you out on a total loss claim based upon the vehicle condition and mileage at the time of the loss. In other words, they will only pay out the current market value of your lease car, and it’s quite possible that this figure will be less than the amount you owe to the finance company.
6) Not Reading The Small Print
Your car leasing contract is a legally binding agreement, so you should read very carefully the Vehicle Order Form and the Lease Contract before you sign them, or you may regret it later. This may seem obvious, but not everyone does it.
Without checking the small print, you may find that only the first year’s Road Tax is provided, or you are being charged a documentation fee which you weren’t told about, or maybe there are restrictions on what you can and can’t do with your lease car. So make sure you’re getting the type of deal that you want.
7) Not Looking After Your Lease Car
If you don’t look after your lease car, both mechanically and cosmetically, you could face a hefty bill from the finance company when your car goes back. All finance companies operate a Fair Wear & Tear policy, which requires that your lease car must be returned in a condition relative to its age and mileage. If you keep up with routine servicing and maintenance as required, and have any bodywork damage repaired professionally, you should be able to minimize the risk of De-Hire Charges.
8) Not Considering Early Termination Charges
Once you sign a car lease, you are committed to that contract for its duration. If your circumstances change and you want to get out of your car lease, there is usually an Early Termination Fee to pay to the finance company to enable you to ‘break’ the lease. This can be quite substantial, especially in the first half of the lease period, so make sure you are comfortable with the car lease period before you sign the contract. The only alternative to paying the Early Termination Charge is to find someone to take over your lease.
9) Not Realizing Your Initial Payment Is Not Returnable
Some people think that their initial car lease payment (usually equivalent to 3 monthly rentals) is a deposit which you get back at the end of the term. This is incorrect, as this payment is an advance rental and part of the overall rental agreement which you have entered into. As such, it is not refundable.
10) Not Ordering Your Replacement Vehicle Early Enough
If you currently have a lease vehicle that you intend to replace, you would ideally like to have your new car arrive at the same time as your old one is collected, so you’re not left without transport. Many people are inconvenienced as they don’t realize how long it takes from placing the order to receiving delivery of their new vehicle. Nowadays, most makes and models are not available from stock and have to be factory ordered. In fact, many of the most popular models can take from 8 to 26 weeks to arrive. So, to avoid disappointment, make sure you plan ahead and order your new lease car in plenty of time.
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