What am I responsible for when leasing a vehicle?

Leasing a Vehicle

Leasing essentially means renting a vehicle long term and provides a way for the keen motorist to constantly be driving a new car – albeit one they don’t own. If that is not a concern, then it can be a perfect solution, especially for firms that need new or relatively new vehicles but do not want to bear the purchasing costs or have a depreciating asset on its books. In that regard leasing may be the ideal car acquisition method and many lease companies also provide vans for business needs, such as a Ford transit.

Therefore, your first responsibility is the monthly payment of the vehicle over the period of the lease, which is typically between 24 and 48 months. There is the potential to reclaim a proportion of VAT paid on maintenance of the vehicle, or sometimes the VAT on the finance rental – ensure you discuss this with your accountant or leasing specialist before you lease.

But let’s hit the brakes for one moment. Leasing a car can be a cost-effective way of motoring, but is not advisable if you’re planning to drive a car into the floor. For example, most leases allow a certain anticipated mileage for the car, to mirror to some extent the depreciation of the vehicle. If you’re planning to cover a high mileage during the lease of the vehicle, be aware that your monthly payment will reflect this as the future residual value of the car will be lower at the end of your agreement.

Remember, at the end of the lease the finance company will take the car back and either re-lease it or attempt to sell it on. This is where leasing often wins, as you don’t have to worry about depreciation and resale value – effectively, you have simply rented the car so at the end of the term you can just move and lease another vehicle.

Different lease companies impose different guidelines on what the driver is responsible for. For example, you might need to pay road tax, or you might not – check with the company.
Some leased vehicles also come with a maintenance agreement. You’ll certainly need to be responsible for your own insurance, informing the insurer that you are not the registered owner of the vehicle. Make sure you research your car insurance fully – this guide from MoneySuperMarket should prove useful.

You’ll almost certainly be responsible for paying charges for any damage to the vehicles, just as you would if you owned it. Exactly what constitutes damage differs from lender to lender, but common charges are incurred for damage to paintwork (scratches, bodywork etc); interior damage such as rips or stains on seats; and damaged wheels or trims, rather than the typical wear and tear which occurs to vehicles of a certain age. Some companies advise attempting to rectify any issues one or two months before the car is returned, to save on possible charges. Also, check the car before you take it from the lease company to look for any damage, so you are not charged for something that is not your fault.

Overall, leasing has its advantages and disadvantages, but it can be a very effective way of getting a good set of new wheels on the road – at a fraction of the cost.

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