Car Leasing Advice
A short intro for people about to take delivery of a new leased or contract hire vehicle.
Regardless of if your new car is a personal or company lease car, the chances are that when you sign for it, you are taking full responsibility for it. This is obvious if you are taking out a personal lease, but a lot of people who are offered a company car with their job, assume the company car is the company's problem -- this is seldom the case these days.
How car leasing worksLeasing a car is an attractive option for a lot or people. You are offered a cheap lease car deal allowing you to get a car you couldn't otherwise afford, and of course, you can have a new lease car every few years. There are many up sides to leasing and very few downsides.
To avoid the downsides altogether, it is important for you to see how leasing works from the lease company's point of view.
A lease company buys a lot of cars and can demand a good price, so they are getting them cheap. They also know that after a period of years they will take the car back and hopefully sell it at a reasonable price. Effectively, they are buying wholesale and selling at market price, and in between you are paying for the cost of the car's devaluation plus a little more for their trouble. So they aren't really making their money out of you the leasee, they don't make their money until they sell the car at a reasonable price. Any car or commercial vehicle will devalue, and most of the devaluation happens in the first few years. The mileage and physical condition effect the rate at which a car devalues and a lease company has to factor all this into it's calculation. If you devalue the car by more than they figured, then they can't sell it at a reasonable price and they lose money. In fact, it's worse than this -- with so many good cars on the market, they may have difficulty selling it at all, it may go round and round the auction, each time costing them money and devaluing further.
But the contract you are signing makes provisions for this eventuality. If you damage the car you will be charged for excess wear and tear, and if you exceed the mileage allowance you will be charged for excess mileage.
Personal Car LeasingIf you leased the car yourself, then you will get the re-charges directly. Now you may be thinking that you have never received refurbishment recharges before, so why should you expect them now?
There are two things you should be aware of, firstly that
the car market has got tougher and the dealers that buy ex-lease cars are
demanding cars in a better condition as are their customers. So lease companies
are forced to charge for excess wear and tear.
Company Car LeasingIf you have a company car, things can seem a little more complicated. There is a good chance that your leasing goes through a fleet manager. If there are refurbishment recharges they will be sent to your company and in the vast majority of cases these will then be passed on to you.
How to identify a company car
As Homer Simpson would say, "It's funny because it's
so true!". There are still people out there who think like Homer, you
would be amazed at the condition some lease cars are returned in... or
maybe you wouldn't!
If you have any doubts about who pays for what, then ask your fleet manager right at the beginning. Ensure you know your responsibilities.
ConclusionIt's all about the devaluation. If you actually bought a car instead of leasing, your car would devalue to a greater or lesser degree, and you pay for that when you come to sell your car. So it doesn't matter if you buy your car, contract hire or lease... the car will devalue, and you end up paying for that. There is no need to worry about this as it is all included in the price unless you devalue the car by more than is reasonable, then you will have to make up the shortfall with refurbishment and excess mileage recharges.
So how do you avoid the refurbishment recharges?
Quite simply, the easiest way is to take better care
of your car. Know your responsibilities. Choose a
car that is easy to take care of in the first place, avoid doing things
that cause excess wear and tear, and if your car does sustain damage,
have it put right.
Regarding mileage, ensure you have a realistic mileage allowance to begin with, be prepared to renegotiate it, and take active steps to manage your mileage if need be.
A good awareness of how leasing works together with some simple and practical steps will make your lease car experience a happy one. To help you, we have assembled a huge amount of information which begins with our car leasing guide.
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This page was last updated on Tue, 21 April, 2009
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