What is car leasing?

Car leasing is a method of paying for the 'use' of a vehicle over a specified period of time.

It's similar to renting, but instead of hiring a vehicle for, say a day, leasing typically lasts for 24 to 48 months.

When leasing a car or van, you don't actually own the vehicle, you are simply hiring it - which brings many benefits.

How does car leasing work?

The vehicle you wish to lease will have a retail price - that is the money it would be worth if it were sold at that point in time.  However you're not buying the vehicle, you're leasing it - so another value of the vehicle is determined.

This is the 'residual value', which is an estimate of what the vehicle will be worth at the end of your lease - after depreciation is taken into account.

Your monthly payments are then based on the difference between the retail price and the residual value.  Therefore you don't pay for the full price of the vehicle, hence the lower monthly payments (compared to financing the entire cost of a vehicle).

At the end of your lease, you simply return the vehicle to the leasing company. 

You will have the option of taking out a lease on another new vehicle.  Or depending on what type of contract you have agreed to, you may be able to keep the vehicle.

How will car leasing benefit you? 

Leasing means that you don't pay for the full price of the vehicle.  Therefore you'll save money each month by having low monthly payments - compared to other finance such as loans and HP. 

You are basically paying an estimation of the depreciation - something that you have to pay for anyway if you were to buy a new vehicle.  Only with leasing, the depreciation risk is with the leasing company, not you.

In a market like today's, leasing is ideal as you know exactly what your vehicle is going to cost you each month - enabling you to budget accurately.

Vehicles are deprecating massively at the moment, and we all know its best not to be sitting on an asset which is losing money.

And if you're lucky enough to have savings to buy a vehicle outright, wouldn't keeping them in a high interest savings account be a better option?

More car leasing benefits...

Vehicle leasing doesn't just make sense financially, there are other benefits too.  Visit our leasing advantages pages.