For whom is car leasing really worthwhile??

Handshake at the conclusion of the car leasing

For someone who needs a new vehicle but doesn’t want to buy or finance one, car leasing is an option. In contrast to buying a car, car leasing is quite profitable for some drivers. Instead of paying years of installments at the bank, you usually only bear the cost of a monthly "rent" and do not have to worry about selling it later on. this variant of vehicle ownership is becoming increasingly popular.

Stamp with leasing imprint

Stamp with leasing imprint

Since the end of 2008, car leasing has been a financial service requiring a license in the federal republic of germany. Leasing is easier than applying for a loan from the bank, which is why about one in five private cars is now leased. But car leasing is not always worthwhile for private individuals. in our magazine, we explain the advantages and disadvantages of this option, compare it to financing and buying a car, and look at special cases such as leasing used cars or without a down payment.

1. How does the car leasing work?

Car leasing means that interested parties rent the vehicle for a predefined period of time. The car, in most cases a new car, is used by the owner but remains the property of the lessor. This levies for the use a regular fee or a one-time payment. Providers of car leasing services include independent leasing companies, manufacturers and car dealerships.

Financing conditions depend on the provider: some require a monthly payment, others are limited to a payment at the beginning and at the end of the leasing period.

Only by serious reasons the contract of car leasing can be canceled, for example by emigration or theft. As long as the lessee is in possession of the vehicle, he is also responsible for maintenance work, repairs and insurance.

Mileage leasing

Folder with leasing documents

Folder with leasing documents

The most common way to lease a car is mileage leasing. Thereby a term is fixed directly at the beginning of the lease, you drive the car during the leasing period. If you drive more during the period, you have to pay for the additional kilometers. You will get a refund if you have driven less than agreed upon. Often the amounts for more kilometers are higher than the repayment for less kilometers. It is therefore worth taking a close look at the ratio in the contract beforehand.

Mileage leasing usually involves less risk for the lessee, provided he knows his average mileage. In most cases, the contracts also include a tolerance range of 1500 to 2500 kilometers, so that a realistic estimate will not result in unexpected costs.

Residual value leasing

With residual value leasing you enter into a significantly riskier form of leasing. In this case, the value is estimated before the contract is signed, how high the residual value of the leased vehicle will be at the end of the lease term. Based on this, the monthly leasing rates are then determined. If the value of the car is higher than the estimate, you get money back. As a rule, however, it is the other way round. If the car is worth less than previously estimated, the difference is due as an additional payment.

The lessee assumes the so-called residual value risk. It is not uncommon for the residual value estimate in the contract to be too high. Moreover, the residual value of leased vehicles is a very uncertain form of calculation basis. Market fluctuations do have a considerable influence on it.

A residual value leasing with right of tender also offers the option of buying the car at the agreed residual value at the end of the contract. However, the lessee does not have the right to buy the vehicle. If the agreed residual value is lower than the actual value, it is possible that the lessor will not agree to sell the vehicle. This form of leasing therefore also involves incalculable risks.

What is my car worth?

What is my car worth?

What is my car worth?

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