So you’ve decided on the vehicle you want to lease but next comes the really tricky bit – deciding which lease agreement is right for your needs. Now when I talk about lease agreements, I’m not talking about lease type e.g. contract hire and lease purchase. I’m actually talking about the different aspects which make up your lease agreement – the terms and conditions if you like. From lease length to mileage limit, there are lots of aspects which you need to consider before you sign that all important lease agreement.
Terms and conditions might seem like the boring part of lease agreements, but getting each one just right is vital to ensuring you get the most out of your lease. Taking the time to tweak these conditions now could save your family or business a lot of stress, money and hassle in the future so it’s definitely worth it.
You might be surprised to learn that there are actually quite a few terms and conditions that you need to think about before you sign a lease. Ultimately it’s your personal needs and finances that will impact the individual terms of your leasing agreement. Here’s a quick run down of the most important things that are essential to think about if you really want to make your lease agreement work for you.
1. Mileage allowance: When looking at your leasing agreement it’s important to check your mileage allowance. Leasing mileage allowances can vary from 10,000 miles to 100,000 miles and the right mileage allowance for your family/business will ultimately depend on your driving habits. It can be tough to estimate your yearly mileage consumption and if you’re in doubt, it’s usually advisable to go for the larger option then you think you might need. Choosing a leasing agreement with a high mileage allowance will give you peace of mind and should give you a bit of redundancy, should you need to make an unexpected long journey.
2. Lease length: The length of your lease is another important consideration you need to think about when you sign a lease agreement. Generally speaking, leases are available between 1 year and 5 years and the size of your monthly repayments should differ in relation to your lease length. A 2 year lease might have quite high monthly repayment fees compared to a 5 year lease, however it only lasts 24 months so should you feel the model or lease type isn’t right for your needs, you only have to live with it for a fairly short period of time.
3. Size of your monthly fee: In today’s tough economic climate, the size of your monthly fee is definitely worth taking into consideration. Your lease fee may suit you for the first year of your lease agreement but what happens during the second year when you can’t afford such high fees? You need to see how flexible your leasing company is when it comes to increasing/decreasing the size of your monthly repayments in the middle of your lease period. Agreeing to a final balloon payment is an effective way to decrease your monthly repayments but it does mean you have a large lump sum to pay at the end of your agreement so it’s important to make sure you have the correct finances in place when your lease expires.
4. Post-lease options: Before you sign any lease agreement, it’s definitely worth thinking about the options which are available to you when your lease expires. Some lease types give you the opportunity to return the vehicle, part exchange it or keep it, so it’s a good idea to make sure you know what your options are when you reach the end of your lease agreement.
5. Value of the vehicle: Estimating the value of your vehicle is an important aspect when it comes to lease agreements. The value of your lease vehicle will have an impact on your monthly repayments and will ultimately impact any final balloon payment you need to pay when your lease expires.
6. Penalties for breaking terms and conditions It’s important that you know details of any penalties which the leasing company will issue should you break any of the terms and conditions in your leasing agreement. Key terms and conditions which are regularly broken include mileage allowance and failure to make monthly repayments.
7. Tax aspects: When signing a lease agreement, it’s a good idea to have a look at the tax advantages each leasing option can offer. Key options like car tax are included in all car leases but some lease options can offer even more tax incentives, such as offsetting interest elements of the lease fee against taxable profits.
8. Initial costs: Before you sign your lease agreement it’s important to make sure you know exactly how much your initial cost is and how you can pay it. It’s no good relying on a cheque only to find out the leasing company doesn’t accept them – make sure you do your research before you commit to a company.
9. GAP insurance: GAP insurance is a must when leasing a vehicle. If you crash a car and write it off, GAP insurance will bridge the gap between your car’s actual value and and the amount you still owe to your leasing company. Some leasing agreements include this insurance as standard but some don’t so it’s definitely worth asking before you sign a lease.
10. Ending a lease early: It’s important to find out how easy it is to end your lease early. When you sign the lease you might think there’s no way you’d want to quit your lease agreement early but circumstances can change so it’s important to do your research beforehand.