Leasing a car – the best tips

Always drive a car that is as good as new and get to know the latest technology at the same time? For vehicle fans, this is an exciting idea. But not everyone has saved enough money to invest in a new car. In addition, vehicles that leave the factory lose up to 24 percent of their value in the first year. For each additional year, the average vehicle will add five to six percent to the leasing price. Hardly anyone can afford to compensate for the loss in value every three years and always drive a new and young car. However, leasing is a good choice for those who still value it.

Car leasing tips

Leasing – an explanation of terms

Statistics show how popular leasing is as a form of financing for new cars: in 2019, 42.1 percent of all newly registered cars were leased. In comparison, this figure was only 30.1 percent in 2002. the name leasing is derived from the english and means something like lease or rent. This already implies the basic principle: the car does not become the property of the driver, but remains in the possession of the leasing partner. The driver pays a rent, so to speak, for the use of the car.

In the past, it was mainly companies that opted to lease vehicles. The reason for this is tax advantages: the leasing installments can be written off. However, it is a prerequisite that the car is used almost exclusively for business purposes. The situation is more demanding for freelancers who use the leased vehicle for both their business and private purposes. In this case, the kilometers driven must be separated into private and business and precisely documented. Private individuals cannot deduct the leasing installments from their taxes. Nevertheless, the model is becoming increasingly popular, as it makes new cars affordable for a broader group of people as well.

What is mileage and residual value leasing??

These two models are the most common. With the takeover of the vehicle, the contractual partner accepts some conditions. With mileage leasing, as the name suggests, the number of kilometers driven per year or for the entire term is fixed. The volume determines the monthly installments. To avoid being confronted with a high additional payment in the end, it pays to think carefully about how intensively the car will be used. For example, if you drive 10.000 kilometers per year, the lease rates are lower than for frequent drivers. It is worthwhile to estimate the mileage higher. Many contracts provide for a refund for kilometers not driven: if the car is used less than expected, the money is returned to the customer. In the other case, however, a subsequent payment is made: if the vehicle has more kilometers on the odometer, this still reduces the value of the car. It is worthwhile to read the small print carefully before signing the contract and to find out about the costs for extra kilometers. Some leasing partners grant a tolerance limit if the agreed mileage is exceeded.

Residual value leasing is offered as an alternative. The value that the car should have when it is returned is already determined when the contract is signed. With this option, no mileage is specified, but it must be clear that many kilometers reduce the residual value. Here are some key points about residual value leasing that will help you weigh the pros and cons:

  • At the end of the contract period, an appraiser assesses the actual value of the car: in most cases, the appraiser determines a lower price than assumed when the car was taken over: this means that additional payments are frequent
  • If the image of the vehicle deteriorates or the market situation affects the value, the lessee gets out badly: you have paid a rate for years that does not correspond to the current value of the car at all
  • Often there are discussions between the lessee and the leasing company about what is meant by "natural wear and tear" or "excessive use". If the car has been involved in an accident, it may be permissible for the leasing company to demand compensation for the loss in value.

Terminate leasing contract prematurely

In some cases, leasing partners may want to get out of the contract early. One thing right away: the leasing companies are not interested in this, because the rates are calculated over the entire term of lease. If there are no clauses in the contract that allow for early termination, a termination agreement must be drawn up. This usually results in considerable disadvantages for the driver: outstanding lease payments and the residual value add up to a sometimes substantial residual payment. Extraordinary cancellations are not foreseen in standard contracts. Even if you have to accept a serious loss of income due to a job loss, the payments can still be made. Not even a death automatically releases the heirs from the obligation to pay: in the normal case, the contract is transferred to the heirs. However, in this case, the contract can be cancelled within one month after the death of the original policyholder.

If you want to terminate the lease early and avoid discussions and lengthy negotiations, turn to professionals who specialize in exactly these situations. The companies make it possible to return the vehicle at the best possible conditions. Since early termination is difficult, it is worthwhile to address this point at the time of signing the contract. All assurances from the leasing bank, which are made verbally, should be recorded in writing.

Leave a Reply

Your email address will not be published.