Here are the answers to the most Frequently Asked Questions about Car Leasing. If you feel I’ve missed out any Car Leasing FAQs, then just drop me a line using the Contact Form.
Car Leasing vs Buying
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 deposit, easily budget for all your motoring costs, and no longer need to worry about depreciation or disposing of a secondhand vehicle.
What are the Disadvantages of leasing a car?
Most, but not all, leasing contracts are ‘rental agreements’ where you never own the vehicle. Also, Comprehensive Insurance is required, excess mileage and early termination charges may apply, and the vehicle must be returned in accordance with the Fair Wear & Tear policy of the leasing company.
What is a Car Leasing Broker and why should I use one?
A Car Leasing Broker acts as an Intermediary between you and the leasing company and, like an insurance broker, can shop around the market to find you the best deal. A good Broker should recommend what is best for you, and provide excellent personal service throughout your contract.
How can I accurately compare leasing quotes?
Make sure your quotes are on a ‘like for like’ basis. Bear in mind contract type, initial rental, payment profile, annual mileage, maintenance, extras included, VAT and admin fees.
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 most Car Leasing Brokers do not accept part-exchanges.
How long does it take to get my new lease car after I order it?
Whether you lease or buy, most vehicles are not in stock and are factory ordered, with few exceptions. Lead times can be vary from 2 – 26 weeks, so plan ahead.
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 our Company Car Tax and Benefit in Kind section.
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.
The Vehicle Leasing Contract
Is my contract with the Broker or the finance company?
Your contract is always with the finance company, whether you use a Broker or arrange your lease through a Main Dealer.
What is the minimum initial payment required?
The initial payment is usually three months rental but it is possible, under certain circumstances, to reduce this to one rental.
What is the maximum amount I can put down?
Most leasing companies will only allow a maximum of twelve monthly rentals in advance on a Contract Hire agreement.
What is the ‘effective rental’ as stated on the documentation?
The Effective Rental is the amount of the monthly rental excluding VAT, plus the proportion of VAT which cannot be reclaimed from HM Revenue & Customs.
Are there any hidden charges?
Most leasing contracts have a Documentation Fee or Administration Fee attached to them, which is a one-off fee to cover the cost of processing the finance application & dealing with contract documentation.
How will the lease payments be collected?
Payments are usually collected by Direct Debit, with the Documentation Fee being taken along with the initial rental in the first month.
What is the ‘Excess Mileage Charge’ and how much does it cost?
The Excess Mileage Charge is the amount payable per mile traveled, over and above the agreed contract annual mileage, and is measured in pence per mile.
Can I change the annual contract mileage during the term?
If your circumstances change, most leasing companies will allow you to amend the contract mileage, and your rental will be adjusted accordingly.
Do I have to go and collect my new lease car?
Cars are usually delivered Free of Charge direct to your home or place of work, and they are also usually collected free at the end of the term.
The Lease Vehicle
Is the vehicle brand new, guaranteed and sourced from a UK Main Dealer?
Unless otherwise stated, all vehicles are brand new, are covered by the Manufacturer’s Warranty, and are sourced direct from UK Main Dealers.
Can I put my personalized 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.
Can I put a Tow Bar on the vehicle?
A Tow Bar can usually be ordered with the vehicle, or you can have one fitted after delivery as long as it is removed before the vehicle is returned.
Servicing & Maintenance for Lease Vehicles
Do I need to take out a Maintenance Contract with the lease?
A 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.
What are my responsibilities regarding Servicing & Maintenance?
All Servicing must be carried out according to the Manufacturer’s schedule, so that your vehicle Warranty remains valid. Also, if you look after your vehicle mechanically and bodywise, you minimize the risk of De-Hire Charges at the end of the term.
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 Maintenance Contract, there is a central number to call to authorize any work or, if not, contact your Broker or local Main Dealer.
Is Breakdown & Roadside Rescue included in the contract?
Usually the first year is covered by the Manufacturer, after which it is your responsibility. Subsequent years are usually included as part of a Maintenance Contract.
Car Leasing Insurance & Road Fund Licence
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 the 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 is Credit Protection Insurance and do I need it?
This offers you Payment Protection if you are unable to continue making your lease payments in the event of unforeseen circumstances such as accident, illness or redundancy.
End Of Contract Options
What are my options at the end of the lease period?
It varies between types of contracts, but you can usually request an extension, ask to purchase the vehicle, or simply hand it back and start a new lease.
What are End Of Lease or De-Hire Charges?
These are charges 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.
What is meant by 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 traveled over and above your contract mileage, and the amount will be stated in your Lease Contract.
Can I terminate the lease agreement early?
You can terminate your lease before it ends, but you will usually incur an Early Termination Fee, which varies between leasing companies.
Do I get my initial ‘deposit’ back at the end of the lease?
The first payment you make is not a ‘deposit’. It’s the initial rental of the lease agreement and, as such, is not refundable.
Company Car Tax, VAT & Legal Issues
What is the P11D Value of my vehicle and why is it important?
The P11D Value is the list price of a vehicle including any options or extras, and it is relevant to the calculation of Company Car Tax (Benefit In Kind) which you may be liable for.
What is the Co2 Emissions of my car and why is it relevant?
This is the level of Co2 emitting from a vehicle’s exhaust. The lower the Co2 of your Company Car, the less Company Car Tax you pay. Look up the Co2 Emissions for your car.
Do I have to be VAT registered to take out a Business Contract?
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.
What if I commit a Speeding, Parking or Congestion Charge offence?
Any fines relating to your Lease Car are passed on to you by the leasing company, and you may have to pay an administration fee as well as the fine.
The Credit Application
Can I lease a car if I have a poor credit rating?
It depends. 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.
If my Credit Score is poor, can I put forward a Guarantor?
Leasing companies do not usually accept Guarantors. However, anyone prepared to ‘guarantee’ you, such as a family member, could take out the lease in their name.
As a Company Director, would I have to give a Personal Guarantee?
Leasing companies do not usually ask for Personal Guarantees (although some may do), but Directors may have their personal credit files checked before their Business Contract is approved.
How long must I have been trading before I can take a Business Car 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.
What financial information does the leasing company require?
Depending on how long the business has been trading and how profitable it is, the leasing company may require the latest audited Accounts and business Bank Statements. Also, proof of the main Directors’ addresses and IDs may be required.