Vehicle leasing in the UK: the basics
Getting a grip on vehicle leasing in the UK can feel tricky at first, especially if you want to guarantee you're getting the best deal on the cost of the vehicle in the long run. There are lots of variables that can affect the rates you get, so if you are thinking about a short-term lease agreement or how monthly lease payment amounts change the whole term, read on to make a more informed decision.
A lease contract in the UK is different from buying a new car vehicle. It means you are "renting" a vehicle for a set time, usually between two and four years. While you have the van during the contract term, you will make monthly payments. Keep in mind that you won't own the vehicle at the end of the term but will have to return it to the leasing company, following rules in the agreement.
The three key parts of leasing
Three elements make up a vehicle lease agreement, with each one having a factor in the total lease price cost.
- Annual mileage: The maximum distance you can drive each year during the lease, known as the number of miles limit. Anything over this limit can lead to extra fees.
- Residual value: What the vehicle is expected to be worth at the end of the contract. The value of the vehicle today plays a crucial role in determining the residual value. A higher residual value usually means lower monthly payments.
- Lease term: This shows the length of the agreement, commonly between 24 to 48 months. A longer term might mean lower monthly payments, but you could end up paying more overall.
Common terms and conditions in leasing agreements
Before signing an agreement, make sure you consider:
- Early termination: Be aware of what it means to end the contract early at the end of the lease term, and any fees that might come with it.
- Credit score: Leasing companies check your credit score to see how financially reliable you are. This affects the interest rates and terms they offer you. A higher credit score often leads to better deals.
- Additional fees: Be aware of possible extra fees such as disposition or excess wear and tear charges when you return the vehicle.
Five first steps to consider
- Do your research: Before entering any negotiations, investigate current market rates and the fair market value for lease agreements, especially for the vehicle or vehicles you're looking for.
- Know your credit history: Your credit score plays a crucial role in determining the lease rate, so ensure it's in good shape.
- Look beyond the monthly figure: Don't fixate solely on the monthly payment. Scrutinise the total cost, including factors like the disposition fee, and consider potential fees to secure a genuinely good deal.
- Compare: Gather multiple lease offers for your target vehicles to give you leverage in negotiations for more favourable terms.
- Read the fine print: Thoroughly review every clause in the agreement to understand fully the commitment and any associated charges.
Researching the rates
Just as you'd shop around for the best telematics, fuel management system and fuel card provider, don't rush into an agreement without first conducting thorough research on what’s available for the best car leasing options and optional extras for your chosen vehicle. Use online comparison tools to compare deals from multiple leasing companies at the same time. Then contact dealerships directly to find out if they have any current lease offers or special deals.
Bear in mind that some models lose value at different rates so opting for a vehicle that doesn’t lose value quickly can lead to a better deal.
Alternatively, used fleet vehicle leasing can be an option as they usually incur lower monthly payments, but always remember to assess the total lease cost including fees, rather than just the monthly payment.
So, what's the best negotiation strategy?
Effective negotiation starts with good preparation in the negotiation process, so before you talk to leasing companies, spend time understanding what your starting point is and how the market works. This will help you secure a lease deal that fits your budget and requirements.
It's vital to have a clearly defined list of your requirements in terms of your fleet, including whether you prefer a new or used car, the mileage each driver covers, and the type of car features you're looking for. From that point it will be easier to establish an affordable monthly payment that doesn't hurt your finances. Factor in how fuel efficiency or lower insurance costs for certain models might save you money.
It's also worthwhile exploring potential savings such as incentives or discounts for specific models or lease periods to help you get a better lease deal.
The downpayment, also called the initial rental, can also be negotiated so if you make a higher downpayment, your monthly payments usually drop, but the cost you pay upfront increases.
