What are the benefits of car leasing?

What are the benefits of car leasing?

  1. Lower, Fixed Monthly Payments - You only pay for the 2, 3 or 4 years that you use the car (i.e. not the entire cost of the car), so your monthly payments are often much lower than other finance options for the same car and same term.
  2. More Car, More Often – With lower monthly payments, you can afford a better car for the same money and keep swapping for a new one at the end of your lease, every 2 to 4 years.
  3. Fewer Maintenance Headaches - If you take an optional maintenance package, the costs of repair and servicing your car will be covered. Also, if you renew your car regularly by leasing it and the length of your lease coincides with the manufacturer's warranty, then the cost of repairs will always be covered!  However, bear in mind that there are will be certain exclusions, such as diesel particulate filters, clutch wear and so on.
  4. Lower Upfront Cash Outlay - Depending on your credit rating, leases require a smaller deposit than car loans, which frees up your cash for other things. For people with a good credit rating this is 3 months payment upfront.
  5. No Used-Car Hassles - Leasing removes the headache of part exchange when you want a new car. When your lease ends, you simply return the old vehicle to the leasing company and walk away, subject to the vehicle meeting BVRLA standards at the end of the contract.
  6. No/Lower VAT Charge -
  • For a consumer – Instead of paying VAT on the entire cost of the car (e.g. £2,000 on top of a £10,000 car) you only pay VAT on the portion of the car that you use. For example, if you lease a car for 3 years you will only pay VAT on the value of the car for those three years  so if a car costs £10,000 and the value of the car over 3 years (36 months) is £4,000, then you will only pay 20% of £4,000 = £800. This is then spread over the 36 months instead of £2,000 upfront.
  • For a business – For a VAT registered business, all the VAT paid on car leasing can be reclaimed if the vehicle is used entirely for business. If it is a company car used for work and leisure, then 50% of the VAT can be reclaimed.  VAT is only payable for the portion of the car that you will use during the lease period (e.g. 3 years as opposed to the 7 year life of the car) and the tax is spread out and paid along with your monthly lease payment instead of being paid all at once and upfront.

Comments are closed.