Car Leasing - How does it work?

AlanD

Hi,

how does car leasing work and is it a viable alternative for the private buyer? What would 400 per month get you on a lease?

A

R.O.R

Hi Alan,

Very much depends on how long you want to lease the vehicle for and how many miles you do every year.

Most people will run leases over 3 or 4 years. The less mileage the cheaper the vehicle.

A contract hire price is made up of what the vehicle can be bought, less what it can be sold for, plus the cost of interest.

crosstownk

Pretty much as R.O.R says. The estimated residual price of the car (what it will be worth at the end of the lease period) is subtracted from the current list price of the car and you pay the difference monthly over the period of the lease plus interest. Obviously the residual price hinges on the mileage and the age of the car. The better the residual price the less it will cost you per month - i.e. a Toyota Avensis would have a much better residual than a Renault Laguna. You can opt whether or not to include a maintenance contract which will cover road tax, tyres, regular servicing, mechanical breakdown, roadside assistance etc. It will not cover accidental damage such as punctures, damage (crash or otherwise). The car is returned to leasing company at the end of the lease. The car is leased to you but does not belong to you - it remains the property of the leasing company.

Alun

crosstownk wrote:

It will not cover accidental damage such as punctures, damage (crash or otherwise).

That's interesting. I drove lease cars for many years, both as an employee and working for myself (not in Ireland, but in Holland admittedly) and I never paid a penny for accidental damage repairs of any kind, except for any insurance excess, if any. Maybe things are different over here?

AlanD

ah ok....makes sense. So why don't people do it for their own private cars if the intention is to keep it for 3/4 years only?

A

crosstownk

Alun wrote:

That's interesting. I drove lease cars for many years, both as an employee and working for myself (not in Ireland, but in Holland admittedly) and I never paid a penny for accidental damage repairs of any kind, except for any insurance excess, if any. Maybe things are different over here?

In Europe it is normal for leasing companies to handle all insurance matters - the cost of insurance is added to the maintenance premium - hence you only got charged for the premium. However, in Ireland leasing companies tend not to handle insurance - it's usually left to the lessee - so you get the bill for repairs and then claim back from your insurer.

Alun

crosstownk wrote:

In Europe it is normal for leasing companies to handle all insurance matters - the cost of insurance is added to the maintenance premium - hence you only got charged for the premium. However, in Ireland leasing companies tend not to handle insurance - it's usually left to the lessee - so you get the bill for repairs and then claim back from your insurer.

OK, that's clear. I guess I just assumed that the lease company would handle the insurance too like in my case.

crosstownk

AlanD wrote:

ah ok....makes sense. So why don't people do it for their own private cars if the intention is to keep it for 3/4 years only?

A

Good question - for some reason it's never taken off here in Ireland for private owners. I think it's an 'ownership' thing - people here like the thought of owning the car after the loan is repaid. I suppose it leaves you with option of not having to continually pay for a car. With a standard car loan you can keep the car for few more years and have no repayments - a lot of people like the comfort factor that brings.

Personal car leasing is very popular in the USA and in some European countries.

AlanD

for me, the last thing I'd want to do is keep a car longer than 3 years, so I generally finance for 5 with a variable rate, sell the car, pay remaining finance off and move on, wash and repeat.

So leasing would make sense. Do fleet hire companies do private lease arrangements too? Would they have rates for most cars? Could I spec my own car then and pay an appropriate lease rate?

A

_Kaiser_

crosstownk wrote:

Good question - for some reason it's never taken off here in Ireland for private owners. I think it's an 'ownership' thing - people here like the thought of owning the car after the loan is repaid. I suppose it leaves you with option of not having to continually pay for a car. With a standard car loan you can keep the car for few more years and have no repayments - a lot of people like the comfort factor that brings.

Personal car leasing is very popular in the USA and in some European countries.

Much like home ownership in this country really.. :rolleyes:

Alun

One of the things that attracted me to it when I was working for myself was that there would be no nasty surprises waiting for me financially. A fixed amount each month, nice and easy to budget for, especially when you're just starting up your own company. Plus when it's time to trade up, no hassle with selling the old car, just make sure the new car is there before the old lease expires, although most lease companies I dealt with were quite flexible with temporary extensions in such cases. I don't know why it's not taken off here either.

crosstownk

AlanD wrote:

for me, the last thing I'd want to do is keep a car longer than 3 years, so I generally finance for 5 with a variable rate, sell the car, pay remaining finance off and move on, wash and repeat.

So leasing would make sense. Do fleet hire companies do private lease arrangements too? Would they have rates for most cars? Could I spec my own car then and pay an appropriate lease rate?

A

Yes, you can spec your own car - extras are added to the cost but usually not to the residual - especially on terms of more than 48 months. A lot of lease companies don't do personal leases (as in the case of the company I work for). But you will find that most main dealers will offer leasing as well as standard finance. If you do lease, remember that when the lease is about 4 months from the termination date to begin the reorder process to allow for lead time - especially if you are specing the car yourself.

R.O.R

Hi Alan,


If you send me a PM I can run some figures for you if you like.

AlanD

So what's the down side?

What happens if the car is crashed and repaired at some stage?

Is there a requirement to keep car fully serviced in a dealer?

there must be a negative.....

crosstownk

Not really any negatives, bar not owning the car at the end of it all. You are obliged to get the car serviced as specified (and why wouldn't you if you have a maintenance contract) and check oils & other fluids. You will be liable if its found you neglected the car and damaged as a result.

BBaskaran

Whats the difference between Private Car Lease and Private Contract Hire ?