Top 7 First Time Car Lease Tips
Whether you’ve only just passed your driving test or have been driving for years and are considering leasing a car, many people are deciding to lease as an affordable and hassle-free way of driving a new vehicle.
Those of you who are new to car leasing will have many questions about how it all works and what you can do to get the best deal. Read on to discover what’s involved and see our top 7 first time car lease tips to get you on the road in no time.
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What is a car lease?
A car lease is essentially long-term rental of a brand-new vehicle, typically for around 2-4 years, for fixed monthly payments.
After you’ve chosen the car you want, you’ll then be asked to decide on an initial payment (also known as ‘initial rental’, ‘deposit’ or ‘upfront payment’), to be paid before your agreement begins. A yearly mileage cap is then agreed between you and the provider of the vehicle, which can be anywhere from 8,000-30,000 miles.
If you work for a VAT-registered company and don’t plan on using the car for solely personal journeys, then you can choose a business car lease. The process is essentially the same as if you were leasing the car for your own private use, but your monthly rentals will be cheaper because 50% of the VAT on a deal can be claimed back.
Insuring a lease car
It’s your responsibility to arrange an insurance policy for the vehicle, although some providers will offer deals which include insurance within the monthly rentals. These can sometimes be branded as ‘total care’ or ‘complete care’ and mean that all you need to pay for is fuel and any repairs/replacements which are caused by driver error.
For example, the following eligibility guidelines may be in place:
- Have no more than six points on your driving licence.
- Be aged 21-70.
- Have a full EU driving licence which has been valid for at least one year.
- Have no more than two claims in the past two years where you were at fault.
- Not have been advised by the DVLA or medical practitioner to stop driving.
Maintaining a lease car
As well as sorting insurance for your leased car, you’ll also need to keep on top of its maintenance. The British Vehicle Rental and Leasing Association (BVRLA) which regulates leasing companies and providers created guidelines which sets out what is and what isn’t considered an acceptable condition for your car.
Your chosen provider will also include details in your contract about what they deem a suitable standard is for its vehicles. Checking the car inside and out every few weeks against these standards will ensure potential problems aren’t left to get worse.
Most car lease deals will offer you the option to take out a maintenance package for an additional cost per month, which will cover you for most repairs. This is only for damage which isn’t caused by driver error and won’t cover lost or damaged items.
Be sure to check out our top tips for maintaining your lease car to avoid facing extra charges at the end of your agreement.
Now that you’re aware of what a car lease entails, here are 5 tips which will help you have a good leasing experience.
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1. Choose an approved provider
A car lease is an important commitment which sees you take responsibility of a brand-new vehicle for at least a couple of years. So, you want to know that the leasing company and provider who is supplying you with the motor are BVRLA and FCA approved.
Depending on whether you approach a provider directly or find a deal you like on a comparison site, there are certain checks you can do to ensure the outfit you’re dealing with is legitimate.
How to check for an approved provider
Before placing any large deposit down on a leased car, you want to first research online top providers near you and read their reviews. Don’t be afraid to look further afield if the ones near you aren’t cutting the mustard, either. Most deals can include delivery to mainland UK addresses.
Here’s what to look for when you reach a provider or leasing company’s website:
- A regulatory statement – often at the bottom of the homepage and includes a six-digit FCA reference number, which you can enter into the Financial Services Register to check if it’s real.
- Provider information (leasing company) – because a comparison site pulls deals from multiple providers, you should be able to see which ones are on its panel, like here. You can then find out if they’re BVRLA members, as well as checking if they specialise in offering deals for certain manufacturers or models.
- Partnerships and affiliations (provider’s website) – like regulatory statements, information about a provider’s access to funders or BVRLA membership can be at the bottom of its website homepage or even ‘about us’ page. If you’re unsure, you can always check the BVRLA’s Member Directory for an up-to-date list of approved members.
- Customer reviews – check for reviews that aren’t five-star for leasing companies and providers, as these will most likely give you an honest account of a genuine customer experience.
2. Get GAP insurance if you can afford it
Guaranteed Asset Protection (GAP) insurance is an optional form of cover that settles any outstanding finance owed on your lease car if the vehicle is ever stolen or written off.
While your main insurance policy will pay out the current market value of the car at the time it’s stolen or written off, there’s still the question of the remaining owed for the rest of your contract.
Where is the cheapest place to get GAP insurance?
There are various places that you can get GAP insurance. However, the most common options are dealerships and specialist providers. It’s very unlikely that you’ll be able to get this kind of cover from your main insurer.
Be sure to look online at individual providers of GAP insurance before committing to a dealership’s offering, which can often be more expensive. This will allow you to compare quick quotes for your chosen manufacturer and model in order to get the best price.
Prices for GAP insurance will vary depending on how long you want the policy to run for, your personal details and the manufacturer and model of car you’ve leased. However, the average cost is likely to be much less for specialist providers than it would be at a dealership.
Need peace of mind and want to protect your lease car? We’ve partnered with the UK’s number one GAP insurance provider, DirectGap, to offer you cover from 1-5 years on Hire Purhcase, Personal Contract Purchase and Personal Contract Hire (leasing) agreements.
3. Be honest with your annual mileage
Deciding how many miles you’ll put on your car’s clock is a very important part of the leasing process. Not only does it impact the price of your monthly payments, but it will be used to judge your vehicle inspection at the end of your lease agreement.
Being as honest as you possibly can with how many miles you drive each year will mean that you avoid extra charges from the finance provider for going over what was agreed in the original contract.
Each provider will charge its own rate per mile, which can range anywhere from 3p to 30p.
Although it’s difficult to calculate exactly how many miles you’re going to cover in a year, there’s a basic formula you can stick to which will give you an accurate representation.
To get your annual mileage, choose a week which is representative of your normal driving habits and multiply the total miles covered by 52. After doing this, add in 5% extra of your total yearly miles for any unplanned journeys, this way you have some wiggle room should you need it.
What happens if I exceed my annual mileage cap?
If before your lease car is collected you realise that you’ve exceeded your total mileage cap for your deal, you should notify your provider or leasing company straight away.
There may be an option for a ‘Mileage Amendment’ to be added to your deal which will mean you won’t get charged an excess mileage fee. Your monthly payments will be recalculated, and you’ll be issued with a new quote if this happens.
Not doing this will mean that you’re opening yourself up to extra charges at the end of your agreement.
4. Consider a maintenance package for longer/high mileage deals
If you’re looking at leasing a car for as long as four years, or plan to drive 30,000+ miles each year, then a maintenance package is a sensible option to keeping your vehicle in good condition.
With shorter or low mileage leases there’s less of a risk that you’ll need repairs for wear and tear items on your vehicle. This is especially true with one and two-year agreements because you will most likely be covered by the manufacturer’s warranty for any electrical or mechanical problems that aren’t due to driver error. The minimum manufacturer warranty is three years or 60,000 miles (whichever comes first.)
One thing to bear in mind is that a maintenance package will be more expensive for deals with higher mileages, as this is synonymous for more wear and tear.
What’s included in a maintenance package?
A maintenance package is a great way to ensure the upkeep of your new vehicle, meaning you won’t have to fork out for any repairs needed throughout your contract.
What’s included in a maintenance package can differ from provider to provider, but generally you can expect:
- Service cost with repairs and replacements – includes exhausts, brakes, tyres and wipers, for example.
- MOT – contracts less than three years don’t require you to take your lease car for an MOT but need to be tested once a year after this. A maintenance package pays for the MOT (if applicable).
- Oil and air filter checks and top-ups.
- Breakdown assistance – 24-hour recovery throughout your agreement.
What’s not included in a maintenance package?
Most general servicing and repairs for wear and tear issues are covered by a maintenance package. But there are limits to the extent of work which is available to you.
The following won’t be included with a maintenance option:
- Repairs for damage caused by driver error or an accident.
- Stolen or vandalised parts or accessories.
- Misfuelling damage.
- Missing or broken items. Body and paintwork damage not classed as normal wear and tear.
- Body and paintwork damage not classed as normal wear and tear.
5. Think about your budget
Knowing how much you can afford to spend each month on a car lease will help you decide which type of car to choose and ultimately mean a lot less stress for you when it comes to the monthly payments.
However, it’s not just the rental price that you must consider when budgeting for leasing. You’ve got to factor in the initial payment price, insurance costs and fuel.
When you’re configuring your lease car, you’ll notice that the initial payment is, for the most part, flexible. Most of the time you can decide how much you want to put down for the car, which will be calculated as a multiple of your monthly rental price.
Typically you’ll have the option to choose between one, three, six- or nine-months’ upfront payment. The more you spend here will mean you have less to pay each month for the remainder of your agreement.
If you have enough saved up to put more towards the initial payment, and it’s going to make the rest of your deal more manageable with the budget you have, then it may be worth doing this. However, if this large sum leaves you with little to spare for the first month and beyond, it would be sensible to choose one or three months, for example. This way you won’t be at risk of the direct debit payments bouncing.
Making sure you’re happy with the monthly price quoted for a lease agreement will ensure you don’t spend above your means.
A large part of getting this right is by choosing a vehicle which you know you can afford to pay off. So, be sure to think about how you’re going to be using the car before committing to any deal.
For example, if you know that you won’t need to carry passengers and just want to commute locally to work, with the occasional motorway journey, you can keep your rental costs under £200 per month with a small hatchback or city car.
If you’re unsure about the exact car you want, but know how much you have available to spend, you can search for a lease deal using your budget.
Other factors will also dictate how much you pay each month, including the length of your contract, annual mileage and how much initial payment you decide to put down.
Because leasing involves paying for the depreciation of a car owned by a finance provider, you’ll find that a longer agreement, such as four years, will be cheaper per month than a two-year contract. This is due to new vehicles losing their value a lot quicker in the first couple of years.
Contrary to popular belief, insurance isn’t included in the monthly payments for a leased car which isn’t on a ‘complete care’ or similar package.
Because a finance provider owns the vehicle too, you’ll be required to protect its asset with a fully comprehensive policy. In our other guide we run you through the requirements for car insurance for a lease car.
This is something to think about when it comes to setting a budget aside for your first lease car. Are you happy with the insurance group that your chosen car falls under? If not, try looking at vehicles which have smaller, more efficient engines and good safety features to drive down the insurance quote for your vehicle.
We advise shopping around different providers too, using a comparison site such as MoneySuperMarket to compare prices for your lease car in order to get the best price.
6. Inspect your lease car before collection
It’s good practice to check over the condition of the car you’ve leased well in advance of the day it’s due to be inspected and collected.
As a guide we would say 10-12 weeks ahead of the handover is a good time-frame to work with. This way you can make any arrangements for repairs or replacements to take place that may need doing. Check out our other guide on returning your lease car for everything you need to send your lease car back without any headaches.
At the end of your agreement, an inspection agent will do a full check on the car, recording any damage considered beyond fair wear and tear, along with a final total mileage for the vehicle across your agreement. As such, it’s important to make sure that there aren’t any issues, otherwise you could face a fine at the end of your deal to fix or replace things.
8 steps to checking your lease car
- Before you get started, ask a friend, family member or colleague to help you, this way the check will be as honest as possible.
- Choose an area and time of day with good light to minimise the chance of missing any faults.
- Make sure the vehicle’s been washed and dried to make sure any faults aren’t masked.
- Walk fully around the car, examining each panel closely as you do this. Remember to check the bonnet, roof, body and doors for extensive damage.
- Scrutinise lamps, windows, mirrors and lenses for chips, cracks and holes.
- Inspect tyres (including any spares) for damage. Remember to test the wear on the tread across each tyre to ensure it’s even. Also examine the wheel trims, wheels and spokes for any deterioration or scratches.
- Clean and valet the inside of the car, checking for any burns, tears, odours, stains and wear on the seats.
- While inside, check audio equipment, controls and any accessories to make sure they’re present and working.
7. Ensure the car is well fuelled for collection
Although fuelling your lease car throughout your agreement is fairly self-explanatory in order to properly use the vehicle, what isn’t so obvious is what happens once it comes to handing the vehicle back.
Most leasing providers advise that you have enough in the tank to last 50 miles, which will be similar to the amount you are given with the car when it’s first delivered to you.
To get a definitive answer, it’s worth checking with your provider about how much fuel they expect the car to have when they pick it up. Most of the time they will have a trailer to transport the vehicle back. However, as lease cars are put through dealers on other forms of finance, such as PCP, or listed for sale as used vehicles, they need to be sufficiently fuelled for this.
Want to find out more about car finance and leasing? Then check out our guides page for everything you need to know.
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