If you don’t want to pay cash for a new vehicle or finance it with a loan, you have the option of leasing the car. When leasing, you enter into a contract that is filled with complicated clauses. You must pay attention to many points here, so that you do not fall into a cost trap.
Many self-employed or freelance professionals take advantage of what is probably the greatest benefit of leasing: being able to deduct the leasing installments from their taxes. Although private individuals can also lease vehicles, they are denied the tax advantage.
In the article you will find information on the following topics:
Leasing – what is it?
In simple terms, leasing means that you, as the lessee, enter into a contract with the lessor for the use of a vehicle for a certain period of time. You may use the car during the term of the contract, but you are not the owner – or will be, as with financing. You have to pay a monthly rate to the lessor, including interest and fees. As a user of the car, you are also obliged to maintain, care for and, if necessary, repair it.
You can lease a new vehicle as well as a used car. However, leasing a used car carries the increased risk of many repairs that you, as the lessee, will have to pay for.
What forms of leasing are there?
The standard forms of vehicle leasing include, above all, the mileage contract or mileage leasing. During the contractual period you pay a monthly rate, which gives you the right to use the car within the limits of a predefined mileage.
A contract term of between two and four years is usual. For every extra kilometer you drive, you will have to pay at the end of the contract. If you drive fewer kilometers, you will be reimbursed by the lessor. The leasing company determines the prices for extra and minor kilometers, whereby the price for the minor kilometers is usually lower than the price for the extra kilometers.
Before signing the contract, you should discuss with the leasing company what is to happen to the vehicle after the leasing period has expired. If you subsequently wish to buy the vehicle, this purchase option should be stipulated in the contract. It is also possible to lease the vehicle or return it to the lessor.
When you return the vehicle, you must compensate for any damage that may have occurred, although this does not apply to signs of use or wear and tear. The so-called depreciation value is determined by an expert, who prepares a return protocol for this purpose. Check the protocol and, if necessary, consult your own expert to avoid disputes in court.
Residual value leasing – leasing with risk?
The first step in residual value leasing is to determine how much the car will still be worth at the end of the contract. The difference between the residual value and the price of the vehicle is the basis for calculating the monthly payment. It is important here that the dealer purchase price is used for the vehicle price and not the dealer sales price, as this can be up to 15 percent higher than the dealer purchase price.
TipThe higher the residual value, the lower the monthly rate. Although this sounds attractive, some leasing companies deliberately set the residual value very high in order to lure customers with low leasing rates. At the end of the lease term, you have to pay the difference between the residual value and the actual value of the vehicle.
A so-called right of tender is also often contractually agreed. The lessee is obliged to buy the car at the end of the leasing contract at an agreed price, if the leasing company so requires. The leasing company can also sell the car to a third party. If you do not achieve the specified residual value, you will have to pay the difference.
What must be considered in the case of zero leasing?
Zero leasing contracts are still a relatively new form of leasing contract and are not offered very often. The list price of the car is the basis for calculating the monthly rate. However, the list price is often significantly higher than the price that would be applied for a financing or a cash purchase. Therefore, caution is advisable.
How is the car lease calculated??
The leasing rate is made up of various cost factors that are often not completely clear to the lessee. First of all, the interest and administration costs are to be mentioned here. In addition, a profit margin and a fee for the default risk, i.e. the risk of the lessee falling behind with the installments, are often included in the leasing rate. In addition, the following factors affect the amount of the lease payment:
The higher the price of the vehicle and the more optional extras you order, the higher the leasing rate will be. It stands to reason that you will get a lower rate for a new ford focus without optional extras, for example, than if you buy an audi A8 with all the extras. also keep in mind that a new car, depending on the brand and type, can lose a lot of value, especially in the first year. This is why the monthly installments are lower for a vehicle with a stable value.
A long contract term can make the leasing rate more favorable, but here, too, the factor of depreciation must be taken into account. A high depreciation leads to a high leasing rate. If the lease is only agreed for one year, the particularly high depreciation that a car experiences in the first year drives up the rate. If the leasing contract is to last for a very long time, the car loses a lot of its value over this period of time. terms of between two and four years are recommended.
If you opt for mileage leasing, the vehicle usage also has an impact on the leasing rate. For example, you can contractually agree on an annual mileage of 15 kilometers.000, the rate is lower than if you had paid 25.cover 000 kilometers.
You can lease a vehicle with or without a down payment, also known as a special payment. Without a down payment you will also have to pay a higher rate. The more you pay in advance, the lower the leasing rate will be.
Leasing – what’s the catch??
Depending on the leasing contract, there may be a catch in some details. Residual value leasing and zero leasing in particular have their pitfalls, which have been described above. Then there are the additional costs, which are often not included in the calculation. As a lessee, you must ensure that the car is regularly inspected. You have to maintain the car, and if repairs are needed, you have to pay for them. This can be cost-intensive, because you have to go to a brand workshop for it. You are not allowed to use an independent repair shop, which is usually cheaper, according to the contract.
To cover these costs, some leasing companies offer full-service leasing. This means that your leasing rate will be more expensive, but the costs for inspections are already included. The extent to which repairs are also covered by this service fee must be clarified individually with the lessor.
Additional costs can also be incurred in the insurance premiums. lessors require you to have fully comprehensive insurance, which requires you to pay much higher premiums than if you had partial comprehensive insurance. If the leasing company offers you a complete package with insurance, you should definitely do an insurance comparison first. In fact, these complete packages may include a surcharge.
The so-called GAP insurance, a lease cancellation insurance, is also offered to you by the lessor. In the event of a total loss, this insurance will cover the difference between the amount you receive from your comprehensive insurance and the outstanding installments with the lessor.
What are the conditions of leasing?
Whether for business or personal use, you must prove to the leasing company that you are able to pay the monthly lease payments and any additional costs for the duration of the lease. Therefore, the lessor will first run a credit check and ask you for proof of income. If you are creditworthy and solvent, leasing the car is not a problem.
However, it becomes difficult if you are only partially creditworthy or not at all. As a rule, you will only be offered a leasing contract under certain conditions, for example if you pay a deposit of up to 30 percent of the vehicle price. Another alternative would be a third person, who is creditworthy, and guarantees for you.
How to cancel a leasing contract?
If you no longer want your leased vehicle or can no longer afford the monthly lease payments and additional costs, the small print in the lease agreement comes into play, which is often overlooked. Keep in mind that in the contract the claims of the leasing company are secured and a termination of the contract is usually impossible. Some contracts even state that they cannot be cancelled even if the lessee dies, so that the heirs must continue to pay the installments.
Leasing is a so-called amortization transaction, from which the leasing company profits only at the end of the contract. If you simply leave the vehicle with the lessor because you are no longer using it or are late with your payments, you will be in for a nasty surprise. Because then the lessor can make use of the extraordinary right of termination, which can be really expensive for you.
In principle, it is possible to terminate the leasing contract if the leasing company agrees. But even then, the provider will demand its lost profit, which means that you will have to pay several thousand euros.
End of lease: what to consider when returning the lease?
When you return the vehicle after the contract has expired, it is best to follow the tips below: