The Most Popular Car Leasing Frequently Asked Questions
In my day-to-day role as a Car Leasing Consultant, supplying new cars and commercial vehicles to business and personal users, I am constantly being asked the same questions about various aspects of leasing a car in relation to business or personal use, the tax implications, the Car Leasing Contract itself, the End Of Contract Options, Fair Wear & Tear, plus lots more. So I thought it might be helpful if I answered the most popular Car Leasing FAQs in a blog post.
Here are The Top 20 Car Leasing Frequently Asked Questions (and answers) that I get asked:-
- What are the advantages of leasing a car?
There are many Benefits of Car Leasing, the main ones being that you can acquire a new car with a low initial outlay, easily budget for all your motoring costs, and no longer need to worry about depreciation or disposing of a secondhand vehicle.
- Can I part-exchange my old car for a new Lease Car?
It may be possible to part-exchange your current vehicle if you lease a new car from a Main Dealer, but a Car Leasing Broker does not usually accept part-exchanges.
- Is it better to lease a car through my business or personally?
Your accountant should advise you on which is more cost effective and tax efficient for you, but check out my article on Company Car Tax and Benefit in Kind.
- Can I lease a used car?
A vehicle cannot be leased if it is not ‘VAT qualifying’, meaning that cars registered by the dealership for staff or demonstrator use can be leased up to a certain age, but cars which have been registered to an end user cannot.
- Can I change the annual contracted mileage during the term?
Your Car Leasing Contract mileage is agreed at the outset but, if your circumstances change, most leasing companies will allow you to amend the contract mileage during the term of the lease, and your rental will be adjusted accordingly.
- Is the vehicle brand new, guaranteed and sourced from a UK Main Dealer?
Unless otherwise stated, all leased vehicles are brand new, are covered by the Manufacturer’s Warranty, and are sourced direct from UK Main Dealers.
- Can I put my personalised registration number on the vehicle?
You are allowed to put your cherished number on your lease vehicle, but make sure you allow enough time to have it removed before the vehicle goes back.
- Do I need to take out a Maintenance Contract with the lease?
A Car Leasing Maintenance Contract is optional, but can provide peace of mind by protecting you from unforeseen expenses. It enables you to budget for all your motoring costs, and usually works out less expensive than paying for parts and labour as required.
- Where do I take my vehicle for Servicing and Maintenance?
You can use your local Main Dealer even if the vehicle didn’t come from there, or you can also use any reputable garage qualified to do the work and stamp the Service Book.
- Who do I contact if I have a problem with the vehicle?
If you have a Car Leasing Maintenance Contract, there is a central number to call to authorize any work or, if not, contact your Broker or local Main Dealer.
- Is Road Fund Licence (Road Tax) included in my lease contract?
Road Tax is usually included for the duration of your contract, but certain types of leasing contracts only provide this for the first year.
- Is Motor Insurance included in my lease contract?
No. You are responsible for insuring your lease vehicle, just as if you owned it, and Fully Comprehensive Insurance is required by the leasing company.
- What is Gap Insurance and why would I need it?
Gap Insurance covers the difference between what is owed on a car, and what your insurance company will pay out, if your vehicle is written off or stolen. It’s well worth considering.
- What are my options at the end of the lease period?
Your End Of Contract Options vary between types of contracts, but you can usually request an extension, ask to purchase the vehicle, or simply hand it back with nothing more to pay and start a new lease.
- What are End Of Lease or De-Hire Charges?
De-Hire Charges are made by the leasing company if your vehicle is returned in need of repair or renovation. It should be in a condition relative to its age and mileage, with no mechanical or visible defects. You are allowed a certain amount of ‘Fair Wear & Tear’. Fair Wear & Tear is a term used to describe the acceptable deterioration in the condition of a vehicle due to normal usage, excluding bodywork damage.
- What happens if I exceed the contracted annual mileage?
You will pay an Excess Mileage Charge for each mile travelled over and above your agreed contract mileage, and the amount will be stated in your contract, measured in pence per mile.
- Can I terminate the lease agreement early?
If you want to get out of your car lease contract early, you can terminate your lease before it ends, but you will usually incur an Early Termination Fee, which varies between leasing companies and could be costly, especially if you terminate during the first half of the lease period.
- Do I have to be VAT registered to take out a Business Contract Hire?
Most leasing companies will offer Business Contracts to non-VAT registered Companies, Partnerships and Sole Traders, but you will still have to pay the VAT even if you can’t claim it back.
- Can I lease a car if I have a poor credit rating?
If you want to lease a car with bad credit, you may have problems. Some leasing companies are more lenient than others, but you are unlikely to be approved if you are in arrears with payments or have CCJs lodged against you.
- How long must I have been trading before I can take out a business lease?
Most leasing companies like to see at least one year’s trading accounts, but it may be possible to obtain a Business Contract if you’ve traded for less than a year. Again, it varies between leasing companies. My article on how to get car finance when leasing a car explains this in more detail.
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