Leasing looks like the ideal way to get the car you want for a manageable cost, but it is not without its pitfalls. Here, we explain the ways in which leasing can trip you up.
Defaulting on payments
If you can no longer meet the repayments, you face a risk that the car could be 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 limit
Over-running 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.
Wear-and-tear bills
Damage and excessive wear and tear will 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.
Insurance
- You must budget for comprehensive insurance cover, because the car does not belong to you while you are leasing it.
- You may also want to consider Payment Protection Insurance (PPI), which will cover your repayments for a limited time if you fall ill or lose your job. 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 is also worth consideration. This will cover any shortfall if the car is written off and the insurance pay-out fails to cover the outstanding finance.
