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In the market for a new car? You might be considering leasing it, allowing you to pay for it for a fixed period of time (often three years) while making monthly payments until the lease expires. Leases are short-term rentals up to a maximum of three years, and typically the cost of rental also includes car services.
“While leasing is newer than the traditional ownership options, it has quickly risen in popularity,” says Barend Smit, Marketing Director of MotorHappy, a supplier of motor management solutions and car insurance options. “However, as with any major financial transaction, it’s important to consider the pros and cons before agreeing to a contract.”
Leasing a car gives consumers more flexibility because it offers the option to drive a new car every few years. “The leasing model is ideal if you want to change your vehicle often without incurring financial penalties. When you lease your vehicle, you’re always driving a relatively new car, and one that’s generally covered by the manufacturer’s warranty. You also get to drive a better car than you might otherwise be able to afford because when compared to buying, the monthly payments on a leased car tend to be lower,” explains Smit.
At the end of the lease agreement, you won’t own the car – however that also means you won’t have to worry about selling a car that has depreciated over time.
“Besides never actually owning the car despite paying your monthly leasing instalment, there are other important cons to consider,” points out Smit. “When deciding on your leasing agreement, make sure that you’re realistic about how many kilometres you usually drive in a year. Companies that lease cars are very strict about the number of kilometres the car can be driven, with stiff financial penalties for any distance over the agreed amount.”
Additionally, while a lease allows for normal wear and tear to the car, you might be charged extra if it’s found to have more wear and tear than is considered fair.
“Finally, like any contract, it’s important to understand and agree to the terms of the contract. If you don’t fulfil the full term of the lease, you’ll likely face penalties,” he says.
Before committing to leasing a car, be sure to do thorough research. Weigh up the costs of buying a new car, investing in a previously-loved car or leasing. When comparing costs, remember to include monthly running costs like insurance, servicing and maintenance, and insurance.