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Car leasing is becoming more and more popular. Individuals are using leasing as a way to get their hands on a new car, without the need to save or get caught up in a lengthy financial agreement. Leasing can seem like the perfect arrangement for car ownership, but only if you know what you’re getting yourself into.
If you’re considering leasing a car, here are five things you should know before you sign on the dotted line.
1. Leasing has many benefits
There are many benefits when it comes to leasing a car. You get to choose a brand new car with little upfront to pay and the knowledge of knowing you can change your car without having to sell it when your contract is up. When weighing up the pros and cons of leasing versus buying a car, you need to think about your unique circumstances and whether or not you want to own your car or keep trading up.
2. Leasing isn’t an alternative to credit
While leasing a car presents a different type of financial agreement to an auto loan, there are still credit implications. Think of leasing your car in the same way you purchase a phone – there is a contract and financial agreement in place. If you fail to pay your bills, you could find your credit rating adversely affected, causing problems with any future financial products you decide to take out.
3. You can negotiate on terms
When you decide to lease a car from a company like ICL, you are not tied to a single contract type like you would be with a car loan. Instead, you can negotiate on the terms to help you build an agreement that is more suited to your needs. For example, if you know you’re going to be covering more mileage than the typical lease agreement, you can add a higher mileage to your contract to avoid you facing further charges at the end of your lease. Salespeople will want to lock you in, so you’re in a healthy position for some negotiations.
4. Your insurance could be higher
One of the many attractions about car leasing is that monthly payments tend to be lower than those for a car taken out on finance. As with anything, there’s always a catch, and the catch with leasing is that your insurance premium might be higher. You’ll need what is known as ‘gap’ insurance, so that if something were to happen to the car like being totaled or stolen – you’ll be able to ‘buy’ it outright to pay off the lenders. This can add to your premium, so it’s worth factoring in the total cost before you commit.
5. You could end up paying much more than you realize
The terms for car leasing can be strict, which isn’t great news if you’re a careless driver or are prone to accidents. When you return your car at the end of the leasing period, it will be subject to thorough inspections – with even the most minor of damages incurring penalties. When you own your own car, these issues are yours alone to deal with, and the only penalties you’ll face are the ones associated with getting them repaired.
The question of whether to lease or buy a car is a tough one and is something that calls for a smart financial decision. Explore all of the available options and talk to others about their lending experiences to help you work out whether car leasing is the way forward for you.