Car leasing - how to get a lease - the pros and cons

With car leasing you don’t actually buy the car – instead you effectively rent the car for a pre-agreed length of time and then hand it back to the leasing company at the end of the term.

The amount you pay is based on the residual value of the vehicle – that is its predicted cost at the end of the leasing term with depreciation taken into account. You pay the difference between the value of the vehicle at the beginning of the term and its predicted value at the end of the term in monthly instalments.

As such, leasing a new car is a great way of securing a vehicle that would usually be out of your price range. Luxury cars generally retain their value much better than most conventional vehicles. In fact, according to research in 2007 the top five least depreciating cars in the UK included the Audi TT, Audi A5, Mercedes SLK and Range Rover Sport.

Car leasing is therefore generally cheaper than a new car loan in the short term – while in the longer term it will prove cheaper to buy. However, with car leasing you do not have to worry about your car’s value depreciating as you can simply hand it back to the leasing company.

Some car leasing companies will include servicing as part of the cost and you might have the option to take out a new lease on the same car at the end of the contract.

The disadvantages of car leasing, other than that the car will never be yours, include the fact that it is difficult to settle the lease early and you will usually have to pay interest charges on the remainder of the contract. You also have to agree to a mileage limit and stick to it or you could face charges when you return the vehicle. You must also arrange comprehensive car insurance as you are effectively driving someone else’s car.