DRIVERS are being warned about hidden leasing costs that could hit their pockets.
From double parking ticket charges to damage denting your budget – we explain what to look out for.
If you’re planning on leasing a car, there are some potential added costs you need to be aware of[/caption]
What is car leasing?
If you’re desperate to drive a brand new car but don’t want to shell out a fortune to buy one, leasing could give you the best of both worlds.
A car lease is essentially a long-term rental agreement, typically lasting between two to four years, whereby you make monthly payments to your provider to use the vehicle.
There are an estimated 1.9million leased cars on the UK’s roads, according to the BVRLA.
“Leasing a car can offer drivers flexibility, lower monthly payments, and the chance to drive a new model every few years without the hassle of selling,” says Carwow expert Iain Reid.
“It’s especially convenient for those who like predictable costs and don’t want to worry about depreciation.”
However, while leasing can save you money compared to buying a new car, it’s not just the monthly payments you’ll have to fork out.
On top of your initial cost, which is normally the equivalent of three, six or nine months’ payments up front, “there are some potential additional costs that drivers should be aware of,” Mr Reid warns.
Here are all the sneaky costs you could be charged by car leasing firms, which could set you back thousands of pounds.
Don’t get caught out by VAT
You must pay VAT on top of your monthly payments when you lease a car for personal use – which is charged at 20%.
“Remember to check whether the prices you’re quoted include VAT, because not all do,” says Mr Reid.
“VAT will turn a £300-per-month car into a £360-per-month car – quite a big difference!”
You’ll also have to pay an admin fee, which tend to be around £300, to cover the costs of forms and paperwork.
“Other routine costs, like servicing, MOTs, and tyres, can be included in a monthly lease for an additional cost, so you’d need to budget for that within the cost of the lease,” Mr Reid adds.
Got a parking ticket? It could cost you DOUBLE
There are few things more frustrating than coming back to your car and spotting the dreaded yellow parking charge notice staring back at you from your windscreen.
If you’re leasing your car, however, it won’t just be the £80 or so that you’ll have to pay.
You’ll also be charged an admin fee by the leasing company, as they’ll be the ones paying the fine.
In some cases, your parking fine could end up costing you double the original fine.
For example, leasing firm Drivalia says on its website that it charges a £60 admin fee if you get a PCN.
“As the leasing company is the legal registered keeper of the car, any fines, congestion charges or tickets will go to them,” Mr Reid explains.
“However, you as the driver will be responsible for paying the fines, so even a £60 parking ticket, could escalate to £85-£90 or more once the leasing company adds processing charges.”
The Sun has seen several examples on social media of car leasing customers being caught out by these extra fees, which they didn’t realise they would have to pay.
Processing fees should all be listed in your leasing contract or on the provider’s website, so make sure you read these through before starting your lease.
You should also hold onto receipts, service records and dated photos, which can provide vital protection and save you hundreds at hand-back, Mr Reid adds.
Even a little damage can dent your budget
When you hand back the car at the end of your lease, it will be inspected by the provider for any damage.
You shouldn’t be charged for any fair wear and tear, which is defined by the British Vehicle Rental and Leasing Association (BVRLA) as “when normal usage causes deterioration to a vehicle”.
However, any damage to the car – even if it might seem small – could cost you thousands.
“A level of wear and tear is expected – leasing companies know that cars won’t come back in perfect condition – but they will expect the car to be returned in as good a condition as possible,” says Mr Reid.
“Scratches, scuffs, or bumper dents can cost £100–£500 per panel, kerbed alloy wheels £80–£200 each, and windscreen chips £50–£150.
“The simplest way to avoid these charges is to repair small damages yourself before returning the car.
“We recommend following the BVRLA Fair Wear & Tear guide – your broker will have access to this, so you know what it means and what to expect.”
According to Carwow, some of the most common issues that result in drivers having to pay end of lease charges include chips or dents on the bodywork; scuffs, scratches and scrapes to the paintwork over 25mm; rips in the car seats; and windscreen chips.
Is it better to buy or lease a car?
DECIDING whether to buy or lease a car comes down to personal preference.
Many people choose to lease a car as it gives them more flexibility, with the chance to try out a new model every few years while avoiding the hassle of selling.
It can also give you the chance to drive a more expensive car that you might not be able to afford to buy.
However, as leasing is a financial contract, you’ll need to make sure you have a good enough credit score to be eligible so the lender knows you can afford the monthly payments.
There are also some cons to leasing – you’ll have to stick to a strict mileage limit, and you could also end up forking out a huge sum if you damage the car beyond fair wear and tear.
When it comes to buying, not only will this be a significant upfront investment, but you’ll also have to deal with road tax and maintenance costs.
What’s more, the car’s value will depreciate, so you’ll get less money if you decide to sell it.
Budget your driving as well as your pennies
Not only will you need to budget your monthly payments when leasing, you’ll also need to plan how far you’re going to drive.
All car lease agreements in the UK come with a strict mileage limit – and going over this could add hundreds onto your final bill.
“Leases typically range from 5,000 to 30,000 miles per year,” Mr Reid says, “and going over your contracted allowance can cost anywhere from 3p to £1 per mile, depending on the make of car and the leasing company’s policy.”
So, if you exceed your mileage allowance by 500 miles and your provider charges 70p excess, this will add another £350 onto your bill.
He adds: “These excess mileage charges will always be disclosed in advance but its worth taking into consideration when calculating your likely annual mileage.”
Autotrader leasing expert Tom Roberts says it’s important to work out a “realistic annual mileage limit, so you are not liable for any additional charges when you hand back the keys.”
Want to cancel early? It’ll cost you
Some providers will allow you to end your lease early if you need to – but it will likely set you back thousands of pounds.
You’ll be charged an “early termination fee” by the leasing company, which can be over 50% of your outstanding payments – and you’ll have to pay it upfront.
This will be on top of any charges for unacceptable wear and tear or excess mileage.
On the other hand, if you return the car late you can be charged up to £50 per day.
If you can’t make your monthly payments or afford an early termination fee, you may be able to transfer the lease to someone else who is willing to take on your contract.
However, many providers do not allow this.
The first thing you should do if you want to end your lease early is to contact your provider and let them know your circumstances, according to Autotrader.
They can speak to the finance provider and try to negotiate the best termination fee, and they can also discuss options for how you can end your lease while protecting your credit rating.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories