What Are The Benefits Of Private Car Leasing?

Private car leasing, also known by the terms ‘personal car leasing’ or even ‘personal contract hire’ is a favourite way of running a car in many countries. In the USA a quarter of cars on the roads are leased vehicles. Businesses have benefited from car leasing arrangements over many years, and now, the private motorists are beginning to catch on.

Many private motorists are still taking out new car loans or entering into hire purchase agreements when they could cut their costs dramatically by switching to car leasing – private.

The lack of knowledge and the view that leasing means ‘It’s not my car’ have added to the slow uptake in the UK.

The mathematics that show the advantages of car leasing over outright purchase are fairly straight forward to grasp. Most drivers spend far more time deciding what make and style of car they would prefer and much less time looking at the options available to them in the purchase. Yes, I know many people spend a while looking for the best finance deals and lower deposit amounts, but they often just look into the areas they already know about.

The more you learn about the process of private car leasing the more you start to realize the savings that could be made. Let’s face it, after your mortgage, the cost of running a car can be one of your biggest monthly expenses – especially if you add finance, depreciation, servicing, fuel and insurance into the mix.

The biggest silent killer when it comes to car purchase is ‘depreciation’ – a cost that most motorists simply overlook.

The minute a buyer drives a new car out of the showroom, the value plummets – sadly, before you’ve got it home it’s well and truly second-hand.

Let’s take a look at an example – me in fact.

I purchased a lovely BMW X5 in June 2006 on a five-year finance deal. The car was priced at a shade under £50,000. I paid a fair deposit along with monthly repayments of £583.00 for 5 years.

Now that didn’t sound too bad to me until someone pointed out the glaring omission from my calculation.

This year, 2011, some five years later I sold the car for £15,000 which gave me just enough to pay off the remaining balloon payment. I had lost £35,000 on the value of the car over the 5 years. That’s an additional £583.00 (co-incidentally) on top of my monthly payments. The car had actually cost me £1166.00 per month.

When I realized I could have driven off the forecourt in the same brand new car and paid around £550.00 per month in total, I was a bit peeved. At the end of the deal I could have handed the vehicle back and started again – no extra expense.

Now let’s take a look at some of the advantages of Private Car Leasing:

• The monthly payments for leasing are usually around a third less than the equivalent car loans.

• Low upfront costs and no capital outlay.

• The deposit required is generally much less – usually around 3 months hire payments.

• The chance to drive a better car with a higher purchase price.

• Road tax is usually included in the lease.

• The car warranty will cover all major parts for the duration of the lease.

Drive a brand new car every two, three or four years and benefit from the latest in economy and vehicle technology..

The best cars to choose for private leasing and those available on the best deals are usually the ones that hold their value best ie. Those that have the slowest depreciation.

The reason that the large leasing companies can offer such great deals mainly boil down to their economies of scale – they buy so many cars each year that they benefit from massive discounts. They calculate the value of the vehicle at the end of the leasing period, take away their initial cost and then add in a bit of profit for themselves – they are in business after all. The cost to the motorist is still much lower than outright purchase.


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