Nationwide Vehicle Contracts provides valuable insight for young drivers who are considering leasing their first car.
Car leasing is a large financial commitment, so if you've never done it before, it can be a daunting experience when taking your first steps.
The process involved with car leasing involves a lot of moving parts, so it's essential you understand what's going to ensure you get the best deal possible.
In this blog, Nationwide Vehicle Contracts provides expert insight into the car leasing process to help young drivers navigate the road to their first car lease.
Understanding Car Leasing Basics
Car leasing is a long-term rental on a car where you make an initial payment and then fixed monthly payments throughout your contract term. It's different from buying a car as you don't own the vehicle outright, meaning that you return the car to the finance company at the end of your contract.
There are various benefits associated with leasing, such as spreading the cost over your contract term, driving a new car every few years, and the car being delivered to your door. Road tax, breakdown cover, and other extras can also be added to your contract terms.
For more information on car leasing basics, check out our Car Leasing Explained guide.
Assessing Your Budget
When considering leasing a car, the first thing to do is establish your price range. Evaluate your monthly income and expenses to determine how much money you can allocate towards a car lease.
Remember to consider additional costs such as fuel, insurance, and potential end-of-lease charges to your price range. According to NimbleFins, the average motorist spends £1,288 a year on fuel, so ensure you align this with your budget.
Finding the Right Car
When deciding on what car to go for, there are various factors you need to consider, such as:
- Safety features – Make sure the car you choose comes with the best safety kit possible, such as collision avoidance systems, parking sensors, and lane departure warnings.
- Fuel efficiency – As it's your first car and you'll likely want to save the pennies, opt for a car with good fuel economy.
- Size – consider a car that's easy to park and manoeuvre, as this will be more practical when driving in urban areas.
- Insurance – Check the insurance rates for the car models you're considering. As a young driver, your insurance premiums will be higher, so go for a car in a lower insurance group to keep overall expenses down.
Comparing Lease Deals
When you've established your price range and car, do some market research. Search around different dealerships and manufacturers for the best deal, as prices will vary from one to another.
Different dealerships/manufacturers will offer varying mileage terms and lease lengths, so find the best deal for you.
Key Terms
Monthly payments
Your monthly payments determine how much you pay for your contract each month. The price varies depending on a range of factors, such as the vehicle, lease length, annual mileage, and specification.
Annual mileage
This figure states how many miles you can drive in a year in your lease car. It varies depending on multiple factors, but usually, annual mileage ranges from 5,000 – 50,000 miles. It's worth noting that if you exceed your annual mileage, you'll be subject to excess mileage charges, which may prove costly.
Lease length
This determines how long your lease contract is. You can lease a car for 24 months, 36 months, or 48 months. Before choosing your lease length, you'll need to consider your future plans to ensure you have a long enough contract to meet your needs.
The Importance of Credit Score
A good credit score is vital for young drivers when leasing a car, as it impacts your ability to secure a lease agreement. Although it may sound boring, always think about responsible credit usage, and ensure you monitor your credit report regularly to identify and rectify any errors.
When you come to submit a finance application to a lender, they will approach a UK credit agency to assess your credit file. If your credit score comes back 'good' or 'favourable', you'll likely be accepted for finance.
For more information, check out our guides, such as Am I Eligible for Personal Vehicle Finance? and Can I Lease a Car with Bad Credit?
Lease Contract Examination
When taking out a lease agreement, you'll first pay your initial deposit on the vehicle. You choose how much to pay (three, six, or nine monthly payments), and the value influences your monthly payments. The higher your initial deposit, the lower your monthly payments.
This will then be followed by your monthly payment, which is a fixed amount due every month for your lease term.
As always with any legally binding document, ensure you've fully read the terms and conditions of your lease contract to ensure you want to get into a long-term financial commitment on their terms.
Insurance Considerations
Car insurance is not included in your lease deal, so you'll have to arrange this yourself and ensure it comes into action before your delivery date. To find the best deal that covers the most, follow these steps:
- Compare multiple quotes – Get quotes from several insurance providers to compare rates and coverage options. This allows you to find the most cost-effective policy to suit your needs.
- Consider deductibles – A deductible is a specific amount of money an insurance provider needs to pay before the plan starts paying out on the policyholder's behalf. The higher the deductible, the lower the insurance premiums.
- Bundle policies – If eligible, consider bundling car insurance with other policies, such as home insurance, as this may lead to discounted rates.
When leasing, you'll also need to consider GAP insurance. It covers the gap between the car's actual cash value and the remaining lease balance if your car is declared a total loss following a fire, theft, or accident. For more information, check out our GAP Insurance Explained guide.
Preparing for Lease-End Options
As the end of your car lease approaches, young drivers have several lease-end options and responsibilities to consider. Depending on your contract, you can either return the vehicle to the finance provider, buy the car outright, or extend your lease contract:
- Returning the vehicle - If you've got a PCH or PCP agreement and you don't want to buy the car, simply return it to the finance provider. This leaves your options open, and you can either take out another lease or look elsewhere.
- Buying the car outright - If you want to take over ownership of the vehicle at the end of your lease term, you can buy it outright (PCP or PLP only). Simply pay the balloon payment, which is the outstanding money due to be paid, and the car is yours.
- Extending your lease - If you like the car and don't want to change, you can extend your lease term. A formal extension is usually available for six or 12 months. For more information, check out our Extensions guide.
Before making any decision, carefully evaluate your financial situation and driving needs in the future to ensure you're making a well-judged decision.
Responsible Driving and Maintenance
The last thing you'll need to consider is maintaining your car in good condition. When you return the vehicle to your finance provider at the end of your contract, it needs to meet leasing fair wear and tear principles.
If your lease car falls outside of fair wear and tear, you'll be liable to pay any excess damage found in the form of lease-end penalty charges. For more information, check out our Leasing Wear and Tear guide.
To prevent this, regularly adhere to the manufacturer's maintenance schedule, including oil changes, tire rotations, and other necessary services. Also, keep the interior and exterior in good condition to prevent minor damage such as stains or rust.
You'll also need to ensure you stay within your annual mileage to prevent charges, so keep an eye on your odometer throughout the year to ensure it doesn't exceed your count.
Looking to get behind the wheel of your first lease car? Nationwide Vehicle Contracts is one of the UK's largest car leasing brokers and offer various leasing deals to suit your every need.
We offer a range of leasing services, including our Fast Lease Service, which uses in-stock cars available for delivery within three to six weeks of ordering.
