Volks Mart

In this short article we will look at the alternatives of leasing or purchasing a car.

There is no hard and fast rule that says one is always better than the other, and the choice of which one depends on people’s specific opinions and circumstances.

The essence of leasing a car is that you are making payments that that reflect the amount that the car depreciated in value over the lease term. For instance, if the purchase price of your car is £20,000 and you decide on a two year car lease with an agreed maximum annual mileage of say 12,000 miles a year, the dealer might estimate that at the end of this period the car will be worth £10,000. This is called its residual value. The difference between the original price and the residual value is the basis for calculating the lease price. Naturally there are additions to this that cover overheads and, as an optional extra, maintenance.

You need to be reasonably confident that your mileage estimates are reasonably accurate, for if you exceed then there will be a surcharge of typically 3p to 7p a mile, however if you over-estimate, then your lease will be more expensive.

Once the lease has ended you simply return the car to the dealer and probably take out a new lease for another brand new car.

Maintenance can be paid for as part of the lease. In that case everything is covered including servicing, consumables such as tyres, and breakdown. This is an added comfort in that you know exactly what your outgoings will be. Alternatively you can opt to take care of the maintenance yourself, but if you do it is essential that you adhere to the manufacturer’s maintenance schedule.

With a lease you will never own the car, but it will be entirely under your control and at the end of the lease you can simply walk away from it and not worry about having to sell it. Or, say you get a Volkswagen leasing deal, you could switch from one model to another.