When you take out a leasing agreement with Nationwide Vehicle Contracts, we are there all the way with you, holding your hand and guiding you through the process to make sure that the process of leasing a car or van is as easy as possible.
But as much as we can do, there are pitfalls that drivers can fall into of their own making, mainly involving them NOT being as honest with themselves as they can be, or under-estimating certain aspects of the leasing agreement - both of which can lead to financial penalties that they may not be able to afford.
Here are the five most common leasing mistakes that drivers need to avoid when entering into a car (or van) leasing contract.
1: Underestimating annual mileage
Part of the calculations for the monthly leasing amount that you pay is how much the vehicle will be used, so car leasing companies initial costs are based on a low yearly mileage - some as low as 5,000 miles a year. This will give a low monthly payment in comparison to a higher mileage requirement, and are therefore attractive to prospective customers.
But if you go over the agreed mileage, a driver would be charged at the agreed excess mileage rate per mile as stated in the leasing contract. (For example, if the excess stated in the agreement is 5p per mile, and the driver exceeded the mileage allowance by 1,000 miles, they would be charged an extra £50.)
So it is important to:
a) Be honest with the leasing company and yourself as to how many miles you will drive in a year, and get a quote based on the truth rather than fiction, and a cost based on actuality rather than prefered.
b) Make sure you know what the excess mileage rate on the contract is.
c) Make sure you do not exceed the mileage limit.
Remember that at the end of the lease, the vehicle will probably be returned to the finance company for selling-on, so they will want an agreed mileage kept to for them to get a good price.
2: Not keeping the vehicle car in good condition
The phrase 'Fair Wear and Tear' is often a bone of contention between a customer and a leasing company at the end of the lease when the vehicle is (normally) returned to the finance company, with customers arguing over what is fair and not.
While ‘normal wear’ is generally acceptable, any additional damage to the car could see the customer hit with substantial repair bills, and the definition of ‘normal wear’ can vary, so it’s important to read the leasing agreement carefully to know what is expected.
Yearly services, maintenance by agreed and reputable garages, and the return of all documents and keys will make up part of the agreement, so it is vitally important to keep the vehicle clean at all times - especially when it comes to cars.
Damaged and dirty upholstery, scratches on trims, dirty and damaged carpets and all other wear and tear that is avoidable need to be addressed before they become a real problem later on. Check out our blog here about keeping your car interior looking as good as new.
3: Insurance
One of the first mistakes that can be made by a new leaser is expecting that the leasing company will sort out the insurance on the new vehicle.
This is completely wrong, and is actually one of the most common questions asked about car leasing.
It is the customer's responsibility to get their insurance sorted out, and it must be a fully comprehensive insurance policy with the hirer obtaining finance being the main policy holder or a named driver on the insurance certificate.
4. Over-stretching financially
We recently published a blog (here) about sorting your budget out for the lease car, and one of the most important thing is to make sure that you are not over-stretching yourself financially.
Be aware that circumstances can change overnight, and think about how much leeway there is between comfortable and struggling when it comes to monthly money. It is important that spare money is there in case of emergencies - and if circumstances change, be honest, and contact the leasing or finance company to discuss your options.
5. Length of lease contracts
Another factor in the monthly cost calculations is the length of contract, with the vast majority of lease contracts 24 to 36 months in duration.
Nationwide Vehicle Contracts offer contracts of two, three or four years, with occasional five year contracts sometimes offered, depending on the customer and the finance provider.
Shorter contracts give the ability to change the vehicle more often, while longer contracts will generally mean cheaper monthly payments - and if a 48 month (four year) agreement or longer is taken out, the customer becomes responsible for the MOT and any servicing requirements as stipulated by the finance company in the final year of the contract.
But it should be noted that although longer contracts mean lower monthly payments, longer deals usually exceed warranties, and also mean that the same vehicle is there for longer too, and as technology is continually changing and being updated, customers may miss out on these improvements.