Car leasing: costs& contract

We show you what exactly leasing is, what advantages and disadvantages there are, what you have to pay yourself and whether leasing also works for private individuals.

Table of Contents

What is car leasing?

Leasing basically means that you "rent" a car. For this purpose, you, as a private person or through your company, conclude a leasing contract with the lessor (car manufacturer or car dealer).

The car remains the property of the lessor when leased. So it still belongs to the car manufacturer or car dealer. You pay him monthly "rent" for the vehicle in the form of lease payments. A leasing contract is usually concluded for a period of two to five years. In this period you can not cancel it. Then you have to return the car to the lessor.

How is leasing paid?

Stack of coins with toy car

With leasing you have to make a down payment, leasing installments and a subsequent payment. © gettyimages/marchmeena29

If you sign a leasing contract, you usually have to make a down payment at the beginning of the leasing period. You then pay monthly installments. the lessor does not charge the value of the car, but only the loss of value due to the use of the car. At the end of the lease you may have to make an additional payment. We will explain how this comes about in the next section on the different types of leasing.

Cautionsometimes leasing rates seem very cheap. Often, however, the down payment is significantly higher than for other leasing contracts.

  • Insurance
  • Fuel
  • inspections
  • Repairs

In the case of new cars, the car manufacturer often covers repairs under warranty or as a goodwill gesture. This may save you higher costs. Insurance is already included in some leasing contracts. You should check the costs for this in any case, because the policy does not always have to be cheap and it can be worthwhile to take out a car insurance yourself.

Importantbefore signing the leasing contract, always check all the conditions carefully.

What types of leasing are there?

Mileage leasing is the most common leasing type. © gettyimages/dima_sidelnikov

The most common forms of leasing are mileage leasing and residual value leasing. In the following, we will explain to you which types of leasing there are and what their special features are.

Mileage leasing

With mileage leasing, you agree with the lessor on the number of kilometers you can drive during the term of your contract. The costs for the agreed kilometers are included in the leasing rates.

If you end up driving more, you will have to pay for the excess mileage. This can be very expensive because of high mileage prices in the leasing contract. If you have driven less than agreed, you will be refunded the cost of the missing kilometers up to a certain limit.

Importantread the leasing contract carefully before signing it and find out what the costs are for excess kilometers driven and how much you would get back if you drove less kilometers.

residual value leasing

  • The number of kilometers, you will probably drive with it.
  • Like the technical condition of the car will be after your use.
  • How high the market price for the vehicle is likely to be.

Depending on the calculation, the lessor determines the amount of the lease payments. At the end of the leasing period, a comparison is made to determine whether the calculation was correct. If the residual value is lower, i.e. worse than expected, you have to pay the missing amount with your last leasing rate.

Because a residual value can be more difficult to estimate, for example, due to new or changed laws, taxes or gasoline prices, residual value leasing often results in additional payments. With a mileage lease, the risk is easier to determine: you know how many miles you are allowed to drive and can calculate how expensive it will be if you drive too many miles.

Zero lease

With zero leasing you must no down payment at the beginning of the leasing period. However, the costs you incur as a result are often passed on to the installments.

A zero down payment lease can be useful if you don’t have a large amount to spend on the down payment. However, zero leasing is generally not cheaper due to the higher rates.

Used car leasing

leasing a used car is a cheap alternative to leasing a new car. Because with a used car lease, the down payment and the installments are lower. But that does not mean that it is automatically a very old car. Often they are newer cars that have only driven a few kilometers.

A disadvantage of a used vehicle can be the higher maintenance and repair costs. Often repairs are no longer covered by the manufacturer’s warranty and you have to pay for them yourself. A used car is also more susceptible to damage.

CautionWhen annual cars are offered for leasing, leasing is often not cheaper than for a new car. In this case it is not worth to do without a new car.

Who can lease a car?

Before you lease a car, the lessor will check your creditworthiness. He wants to make sure you can reliably pay your lease payments. If you have a bad credit rating, in some cases you can also put down a deposit or a guarantee.

Where can I lease a car?

You can also lease a car directly from the manufacturer. © gettyimages/torque

You can lease a car directly from a car manufacturer or a car dealer. For initial information on leasing options, call or visit the manufacturers’ and dealers’ websites. If you are not sure which brand you want to lease a car from, check with different car dealers or take a closer look at the cars on site.

What happens after the lease expires?

When the lease expires, you usually have to return the car, or you sign a new lease and continue to keep the car.

In rare cases you can buy the car from the lessor. But most of the time it is not worth it. Because the leasing rates and the purchase price are often higher, as if you buy the car directly through a car loan.

Is it worth leasing a car??

If you want to lease a car privately, you should weigh the advantages and disadvantages well. © gettyimages/badmanproduction

Whether it is worthwhile to lease a car also depends on whether you want to rent it privately or as a company. Companies and self-employed people can deduct the installments for leasing from their taxes in any case. But as a private person you have no tax advantages.

For private individuals leasing is therefore rarely worthwhile. In this case a car loan makes more sense. The installments are higher with a loan than with a lease, but the car becomes your property. Buying a leased car is usually more expensive than buying it directly through a car loan.

To make it easier for you to decide for or against leasing, we have listed all advantages and disadvantages for you.

Advantages of leasing

  • You get a new car without having to spend a large sum on a purchase.
  • At the end of the leasing period you can simply return the car and don’t have to worry about selling it.
  • You can always drive a new car.

Disadvantages of leasing

  • If you drive more kilometers than agreed, or if the residual value is worse than calculated at the beginning, a subsequent payment can be expensive.
  • You must always take good care of the car, because it is not your property.
  • You must have any damage (even if it is only a small scratch) repaired immediately. This may increase the cost of repairs.
  • Repairs must be carried out in a brand workshop. It can be more expensive than going to an independent repair shop.
  • You cannot terminate a leasing contract before the end of its term. The only option is to buy out of the contract. But this is often more expensive than letting the lease expire.

Leasing& insurance

In the case of leased vehicles, lessors usually require a comprehensive insurance. In rare cases, the lessor takes out the insurance. but the costs for this are usually included in your rates. If that is the case, you should always check the police carefully. Because it may happen that you find a cheaper supplier.

By the wayif you take out insurance, it makes more sense in most cases to choose a contract without a workshop commitment. Workshop commitment means that the insurance company will only pay the damage in full if you have your car repaired at a workshop contracted by the insurance company. But in most leasing contracts it is agreed that repairs have to be done in a brand workshop. If you have a garage agreement, it can happen that the insurance does not pay the repair in full.

Comprehensive insurance is especially important in the event of a total loss or theft. What happens in such cases, we explain you in the following.

What to do if the leased car is totaled?

In the event of a total loss, fully comprehensive insurance pays out. After that the leasing contract is normally terminated. However, the lessor can claim the outstanding lease payments from you as compensation for damages.

the claim can in some cases be higher than the compensation you get from the insurance company. That’s why you should always make sure that your insurance policy includes a so-called GAP coverage when you sign your leasing contract. It pays for the additional costs you may incur in such a case.

Example: if you have 30.000 euros in damages from your fully comprehensive insurance, but your lessor will pay 35 euros in compensation.000 euro, you would have to pay 5.000 euro pay yourself. However, if you have taken out GAP cover, the additional cover will take over the remaining costs (5.000 euro).

If GAP coverage is not included in your lease, you can purchase it in addition to fully comprehensive insurance. the amount of additional insurance depends on the provider and the amount of your deductible.

What happens if the leased car is stolen?

even a theft is normally covered by the comprehensive insurance. But if your insurer doubts the theft, you as the lessee have to pay for the damage.

Whether the leasing contract is terminated afterwards or you have to pay a redemption for the vehicle is agreed in the leasing contract. It may happen that the compensation of the fully comprehensive insurance does not fully cover the redemption and you have to pay the remaining costs have to pay yourself.

Tip: check in the terms and conditions of the additional insurance if the GAP coverage also pays in case of theft. Because GAP coverage normally only pays for accidents, theft may be excluded from the insurance.

We explain what you should do in the event of theft and what you can do in our article "car theft: what to do& who pays".

Take care of your leased car!

You should take extra good care of a leased car, because it’s not your property. To ensure that you can return the car to the owner in top condition after the leasing period, we explain in our article "car care: tips for the whole year"how to take care of your leased car depending on the time of the year.

We wish you a safe journey! Your allianz direct

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