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Everything you wanted to know about car leasing explained

By Julie Davidson

Republish: EasyPublish™ Published: 28Jun2009 Word count: 1018 Viewed: 1490 time(s) Get Free Content For Your Site

If you like the idea of a new vehicle but don't want to pay outright, or want to be able to trade it in after a year or two, then car leasing might be the right choice for you. Vehicle leasing is a popular option these days because it allows you the luxury of driving a new car without making the hefty payments that come with ownership.

What is car leasing?

Basically, vehicle leasing means you rent the car from a finance group that has purchased the car. After the lease term has expired you have the option of paying off the vehicle or trading it in for a newer model.

Benefits of Vehicle Leasing.

There are many benefits to vehicle leasing. Car leasing is great if you use your car for business, want to lease a car model you wouldn't be able to afford if you bought it, or if you want to be able to trade in a vehicle after every two or three years. Below are more benefits you might find attractive.

* Low deposit: When you purchase a car you often need to put a deposit or a combination of a deposit and trade-in to front your loan amount. When you lease, you will still need a deposit, but it will be a smaller amount. This means you can invest the money you save instead of putting it into a car.

* Lower monthly payments: Payments are lower when you use a vehicle lease because you are paying for the depreciation on the vehicle, not the total car price.

* Easy trade-in options: If you're one of the many that like the benefits of driving a new car, you can rest easy when it comes to trading in your leased car at the end of the term. The finance group owns the vehicle, not you. You're not stuck with the headache of selling the vehicle or getting a better deal for a trade-in.

* Flexible car lease terms: Many vehicle loan finance companies will offer flexible lease term options. Though most leases begin at two years you can expect to see some leases last as long as 60 months (five years).

* Secured Lease: The lease is secured by the vehicle, so if you default in your car lease payments the finance company will repossess your car. Though unpleasant, it's not as scary as the thought of losing something more drastic, such as your home.

Business Lease Benefits.

For companies that lease vehicles, the car leasing payments generate GST (Goods and Service Tax) and therefore can be claimed back in most cases. If you purchase a car for business and want to have it financed instead, some finance companies (for example, www.fincar.com.au) will buy your vehicle and lease it back to you.

Disadvantages.

Like anything good in the world, there are disadvantages to car leasing. Some are equity related, while others have to do with fees. Read on to see if these disadvantages will turn you off from pursuing vehicle leasing as an option.

* Lack of Capital: If you bought the car outright on your own instead of using a car lease, you would have capital in the car over the length of ownership. When you use vehicle leasing the capital belongs to the finance company, not you.

* Early termination fees: Some car leasing companies will charge a fee for early termination of your lease. Some finance companies will not hold you responsible for an early termination fee if you cancel your vehicle lease after the first six months while others will. Check to see what the terms are, so you do not find yourself saddled with surprise fees.

* Overage fees: Many car leasing policies charge you a penalty if the odometer shows more kilometers on the dial than allotted in your contract. You'll pay a few cents per km, but remember that it adds up. If you are charged $.10 per km, a 1,000km overage will cost you $100 extra at the end of your lease.

* Fees for a less-than-perfect returned vehicle: If you're hard on your vehicles you may not want to consider car leasing because you will be charged for wear and tear on the vehicle's interior and exterior. So if you've got an active family or a love of water dogs you might want to consider owning instead.

At the end of your lease, what are your options?

The great thing about vehicle leasing is that there are many options open to you at the end of your lease period.

* You can trade in your vehicle and start the process again with another new car lease. The advantage is having a brand new car again in a short period of time - who doesn't love driving a new car?

* You are under no obligation to purchase the car, but you could, if you wanted to do so. Usually when you enter a vehicle leasing contract, a price to purchase the vehicle at the end of the lease is outlined and stated in your paperwork.

* You could return the lease vehicle and go a totally different route, such as buying a new or used vehicle elsewhere.

Leasing is a viable option for disabled Australians.

If you're disabled then you may qualify for car leasing GST-free. You must have a certificate from the HSA (Health Services Australia) or be a Veteran who is disabled due to service in Her Majesty's armed force. Generally, this option is available if the vehicle lease is for a car under $57,000 (approximate), for a period of two years minimum and the car is used for less than 40,000km travel a year. Of course, other details may apply, so read the fine print carefully.

In Conclusion.

Car leasing is a great opportunity for someone that likes driving a new car and trading in a vehicle every few years. It's also a fantastic option that allows you to drive a luxury vehicle you may not be able to afford normally. There are many vehicle leasing options, so review them carefully and choose the best one for you to make your experience exciting and rewarding.

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