Pros and cons of leasing a car

Car leasing can be the ideal way to get behind the wheel of the car you want. It wraps up monthly payments into a fixed amount, you can choose the number of miles you plan to cover over the length of your agreement, and you can even build in service and maintenance plans to the contract to protect against unexpected costs.

But while features like a comparatively low deposit have obvious appeal, a car or van lease agreement may not be suitable for everyone. Below, we've run down the pros and cons or leasing a car or van to help you make the right decision.

What are the benefits of car leasing?

- Leasing a vehicle gives you the opportunity to drive a new vehicle that you may not have been able to afford otherwise.

- No need to worry about the depreciation of the vehicle or having to sell it afterwards, you simply hand back the vehicle at the end of the agreed contract.

- The monthly payments are often much lower than buying a vehicle outright.

- The agreed monthly rentals don't change. So, whether you are a business or an individual this will allow you to plan your budget. However, if you go over your mileage you will be charged an excess-mileage fee.

- Your car leasing contract will usually include road tax (VED).

- You can ask for a lease to be tailored to suit your needs. You select the contract length, mileage and initial payment that best fits with your personal circumstances and the dealers or brokers will get back to you with a personalised leasing quotation.

- VAT registered companies can claim back a percentage of the VAT on the finance, dependent on whether the vehicle is used for only business purposes or not.

- You can take out a maintenance contract on your lease vehicle, which can cover you for servicing and general wear and tear. Depending on what's covered, you may only need to get the vehicle insured and fill up the fuel tank.

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What are the drawbacks of car leasing?

- If you can no longer meet the repayments and default, you could risk the car being repossessed. Realistic budgeting should help avoid this, but if unforeseen circumstances arise, you should contact the finance company as soon as possible to explain the situation and discuss your options.

- Exceeding the mileage limits can be costly, because you'll incur a financial penalty for every extra mile covered. So, set a realistic mileage limit at the start of the contract. However, if you find the mileage limit impossible to meet, contact the company to discuss adjusting your arrangement.

- Damage and excessive wear and tear can lead to big bills when you return the car. Keep it in good condition and check it carefully before you hand it back. It's worth getting any issues sorted before you return the car.
 

Do I need insurance when leasing a car?

- You must budget for comprehensive insurance cover, because the car does not belong to you while you are leasing it, and the car must be returned in good condition.

- Optional payment protection insurance (PPI) covers your repayments for a limited time if you fall ill or lose your job. You may want to consider this, but check carefully to see if this cover is suitable - it won't cover you if you're self-employed, for example.

- Guaranteed Asset Protection (GAP) insurance will cover any shortfall if the car is written off and the insurance pay-out fails to cover the outstanding finance. Like PPI, this is not compulsory.

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