Buying on lease…

Buying a car on lease means you drive a new car, which you can change every few years, with a relatively low monthly payment plan and without the worry of the car’s resale value.

There are two types of leasing available;

  • Personal contract hire (PCH): you never own the vehicle and you have to hand it back at the end of the term.
  • Personal contract purchase (PCP): you have the option to buy the vehicle at the end of the term in exchange for a balloon payment.

As with all rental agreements, there are some restrictions you need to bear in mind:

  • If you cancel your contract and return the car you’ll probably have to pay a fee, or might even be liable to pay all the outstanding rental payments.
  • You won’t be able to modify the car in any way – for example, adding a tow-bar – without permission. However, you can ask the leasing company to make modifications before you take it.
  • If you exceed the agreed mileage, you’ll have to pay a penalty for this extra mileage at the end of the agreement. It’s typically calculated per mile you exceed, it’s always worth checking how much the charge is before leasing the car as this could end up being a higher bill than the car itself, it can be a slippery slope!
  • You must return the car in good repair and condition (standard wear and tear is taken into consideration).
  • If you plan on taking your car abroad, you might need to get written permission from the finance company each time you do so and there might also be a charge.

Content sourced from the Money Advice Service website