Leasing a car is similar to any other rental agreement: you pay to use the vehicle for a set amount of time for a fixed rate, and once you’re done, you return it to the leasing company. But with so many Car Lease Deals out there how do you know where to begin?
Leasing is an affordable alternative to car ownership if you know how to secure a good offer. The added advantage of leasing is that depreciation is not your responsibility, you never have to sell the car on and you can arrange to pay a monthly fee to cover both your car’s maintenance and insurance.
In practice, there can be a lot of things to consider when searching for car leasing deals, especially if you are leasing a car for the first time.
Find some of the best 6 tips below that you should know to get the best monthly rate on your next vehicle lease contract:
1. Learn your annual mileage
Having a clear idea about the miles you cover a year will let you get better leasing deals. You can choose how many miles you’ll cover a year, and your contract and payment amount will be based on that.
Lower mileage means lower monthly payment and vice versa. It is important to estimate it precisely as there will be penalties for underestimating the mileage, which can start from 7p a mile. That means that if you exceed your contract by 5,000 miles, you’ll be out of pocket by an additional £350 – which could be an unpleasant surprise.
Make sure you consider these things while calculating the average annual mileage:
- Make note of your regular journeys like work commute, family visits, etc. Calculate the distance and multiply it with the number of times you’ll be travelling.
- Checking your previous car’s MOT history for services will give you an idea of the miles you cover each year.
- Add 5 – 10% more to your annual mileage. This will prevent you from paying a higher amount for exceeding the limits.
Estimating your annual mileage correctly is key as it will give the best value for your deal.
2. Read up on your manufacturer’s warranty
Your vehicle warranty will cover most of the manufacturing defects or damages during the warranty period.
Warranty counts, especially when you are leasing a car. But the defects covered under warranty will be different for all manufacturers.
A warranty usually lasts for 3 years, but you should inquire specifically about yours. Once the warranty is over, you will have to pay for any repair.
- Ask the leasing agent about your warranty, how long it lasts and what damages are covered under it.
- Buy a maintenance package. It will cover your MOT, regular service and any parts that need fixing or replacement.
- Read your manufacturer’s warranty policy. Understand what is included and what is not included and how long it lasts. Each manufacturer has different policies.
Taking a maintenance package will ensure that you don’t have to pay for any damages outside of the warranty.
3. Get a suitable initial rental.
Your initial rental, otherwise called a leasing ‘deposit’ is what decides your monthly payment amount, and is usually calculated per periods of 3 months (3, 6, 9 or 12).
Paying a higher initial rental means that your monthly payments are lower, and paying a lower one means your monthly payments are higher. Therefore, you can ask for a leasing deposit based on your financial needs.
- Discuss your circumstances and needs to your leasing agent. They will suggest the best choice for you.
- Any leasing website should have a monthly configurator, which will estimate your monthly payment based on whether you take out a 1 to 12-month initial payment.
- If you know your credit score, you’ll feel more confident in getting a lease contract with a one-month initial rental.
Try to negotiate with the company providing the contract to get the best deal according to your finance needs.
4. Avoid cancelling your leasing contract early.
Other than buying, leasing is the most simple and convenient way to drive a new car.
It is equally important to know that your leasing contract is a long-term responsibility. When you sign the contract, you agree that you will pay the rentals and you will return the car on time.
Cancelling the lease before time can invite high termination penalties along with a negatively affected credit score:
- Read your lease contract and research the vehicle, its comfortability, common issues, etc. Think twice if you are comfortable with the monthly payments and the vehicle itself.
- Your leasing agent can tell you all about cancellation penalties. All differ, but there is a chance that a termination could result in payment fees of up to 50% of the entire contract.
- Consider the effect on your credit score before cancelling. Note that cancelling your lease contract will open up the option for a potential negative record on your credit score.
While leasing a car, think of how long will you use it and when will you think of buying or leasing a new car.
5. Read your contract and the fine print
Never sign on your lease contract without reading and understanding it completely. It will contain everything you need to know about the deal – miles, duration, maintenance, penalties, etc. And it is important to know all of that to avoid an accidental contract violation later.
While taking a car lease,
- Don’t forget to read the contract completely – it’s your responsibility to avoid any problems or miscommunications later on.
- Any doubts or clarifications needed? Never hesitate to ask your lease agent.
- Learn leasing related jargon to understand the contract better.
Never sign the contract if you have any unanswered questions.
6. Bonus: The 1% Rule
How do you know if you are getting the right leasing deal?
The 1% rule.
It is the quickest and easiest method to know if you are getting a good deal. A competitive leasing deal means you are paying close to 1% of the vehicle’s total monthly cost. Of course, it depends on the initial payment and annual mileage, but the 1% test will give you a rough idea of the deal you are getting.
It’s important to remember the following:
- You are dividing the cost per month by the retail price of the car excluding taxes. If it is less than 1%, it is a good deal. If it is above 1%, it may not be a great deal.
- Over 1% does not necessarily mean it is a bad deal, as the monthly payment depends on the mileage and other numerous factors.
- If you chose a higher mileage deal, you might pay a little over 1% to cover the car’s increased depreciation.
- Try asking the leasing company for a better deal, especially if you have an excellent credit record.
The 1% rule is not the ultimate criteria to judge a deal, but it will help you determine whether it is a great deal or a bad deal.