It is becoming increasingly popular to lease a car as the benefits are substantial. Many drivers are deciding this method as it involves driving a vehicle that you lease for a monthly fee over a fixed period and mileage. One of the main benefits is that you can simply hand the car back at the end of the fixed term to the leasing company which can save a lot of hassle.
The monthly payments that you pay are set based on the vehicle’s expected depreciation, which is calculated by estimating the difference between the purchase price and the resale value at the end of the agreement, taking into account age and mileage. If you lease a car that holds its’ value then that means your monthly payments will be lower.
Leasing a car allows you to drive a new car every three years without worrying about how to resell the vehicle and how much it will depreciate in value. If you buy a car the monthly payments and deposit will be higher which puts drivers off this option. If you lease the payments will be fixed which is always a comfort particularly if your circumstances change. For those individuals who are VAT registered you can claim 50% of this back on your finance payments.
This is a great way for an individual to drive a new vehicle every 2 to 3 years with the addition of not having to worry about a large fee or balance to pay at the end of the fixed term.
An option for those that lease is to opt for a personal contract purchase which allows you the opportunity to buy the car if you wish. This would mean that you would have to pay a deposit plus monthly payments until the end of the contract. A final amount will also be calculated taking into account depreciation at the end of the lease. This also has an alternative option when you can part exchange the vehicle for a new model. Again this option gives the individual the chance of choosing a fixed repayment scheme making monthly budgeting easier.
The main plus about leasing a vehicle is that it allows you to drive a more expensive car than you would buy outright and at the end of the fixed term you can walk away.
Hire purchase is an option when you find the car you would like to purchase, pay a deposit with monthly payments. Once you have paid the full amount the car is yours. However, what you pay depends on the price of the car and how much you have as a deposit. A word of warning here is that you cannot sell the vehicle without the permission from the finance company plus if you fall behind with the payments the car will be repossessed.