More and more people every year are switching from 'traditional' methods of purchasing a new car to leasing. There are now nearly 2 million leased vehicles in the UK.
What is Personal Leasing?
Car leasing is very similar to renting. You choose your vehicle for an agreed period, commonly between 2 and 5 years, agree what mileage per year you will drive, then you pay a fixed fee for the agreed period, (because leasing attracts VAT, if the VAT rate goes up or down so will your rental). You NEVER own the vehicle.
A lease is worked out based on a few different factors,
- Value of the new vehicle,
- How many miles you will drive over the length of the contract
- What the funder estimates the value of the car after you have returned the car, known as Residual Value (RV).
Because in essence you are only funding the depreciation on the vehicle, this makes leasing a cost effective way of driving a brand new car.
Why is leasing so cost effective?
As explained previously, with leasing you are simply paying the deprecation cost of the car. Road tax is included for the length of the contract so you don’t need to worry about this. If you choose to take a maintenance, servicing and tyres, including punctures are normally covered.
Because finance companies buy from manufacturers in bulk they get the advantage of hugh discounts, along with dealers adding discounts in. These discounts are then passed on to the leasing brokers. This equates to a cost effective way of driving a car.
Who can apply for personal car leasing?
Basically, everyone who meets the following criteria listed below can apply and is eligible for a personal car lease
- Hold a british passport
- Be on the electrol role at the address your are living at
- Hold a full UK driving licence
- Have a regular income that can be proved
- Provide 3 years employment history as a minimum
- Not been declared bankrupt or have IVAs or CCJs against your name
To qualify for a personal lease car you will have to undergo a personal credit check. This involves completing a finance application form that is then submitted to the finance house.