You’ve just passed your driving test. Your driver’s license is still brand new and shiny. You’re finally ready to get out on the road.
But wait, as a new driver surely your best option is to buy a cheap old banger? Your first car isn’t supposed to be nice – it should be purchased with the funds from years of paper rounds and at least be as old as you are.
Well, actually, there’s another way – you could lease a car.
But is leasing suitable for first-time drivers?
What is car leasing and how does it work?
Car leasing, often referred to as personal contract hire (PCH), is a popular type of car finance. It’s effectively a long-term rental – you’ll pay fixed monthly payments and in return you can use the car for an agreed period.
When the lease ends, the car is returned. At which point you could upgrade to another car on another lease if you wanted to.
With a lease agreement, you can also opt for a maintenance package to be included in your monthly payments that will cover things like servicing.
I’ve just passed my driving test; can I lease a car?
Almost anyone can lease a car. In fact, one of the only exceptions is if you’re under the age of 18. So, if you’ve passed your test and you’re still 17, you would need to wait until your next birthday to apply.
Another point to bear in mind is, as with all car finance, a credit check will take place. Most lenders will be looking for signs of a good credit history, which in some cases can be difficult to prove when you’re a younger driver who hasn’t had the time to build up a credit history.
There are some steps you can take to improve your chances of being accepted for car finance, though, and we’ll look into that further on.
Should I buy or lease my first car?
The answer to this will always depend on your personal and financial circumstances.
If you’re looking to buy a car outright, the more you can afford to spend on it, the better.
While you can pick up a cheaper, older car, there’s always the chance that it may not be as reliable and could cost you more over the long term in repair bills.
Unfortunately, a lot of new cars aren’t cheap and, even with finance to help, there are still the factors of depreciation and resale value in the future to consider. But that’s where leasing can help.
Leasing has become more popular because it’s an affordable way to get your hands on a brand-new or Approved Used car.
As a new or newer car, it means better fuel consumption, which keeps costs down, as well as up-to-date safety features. You’re also covered by warranty, and if you decide to include the optional maintenance contract, you won’t have any servicing or unexpected maintenance costs to worry about either.
Here at Hippo, all our lease deals also come with the option of £0 deposit, although, you’ll never own the car, so if that’s important to you, it may be better to opt for buying.
Leasing vs buying: The pros and cons
Leasing A Car
- Low monthly payments
- Drive a better car for less money
- Lower repair costs as the car is under warranty
- Drive a new car more frequently
- No worries of depreciation
- Don’t have the hassle of having to sell or trade in when you’re finished with the car
- You don’t own the car
- Mileage is typically limited
- Typically more expensive in the long run than against if you were to buy a car and keep it for a prolonged period
- Extra charges for excessive damage
- Can be costly to terminate your lease if your needs change
Buying A Car
- You own the car
- Save money over the long term
- No mileage restrictions
- Modify the car however you want
- Can be used as a part exchange on a new car
- Lump sum of money needed upfront (if buying cash)
- Higher monthly repayments (if buying on finance)
- You’re responsible for repair costs outside the warranty
- More money tied up in your car
- Depreciation means you’ll likely lose money when it comes to sell
How affordable is leasing a car?
The monthly payments for leasing are determined by a range of factors. But there are things you can do to keep costs down.
If you choose to spend any money you’ve saved up on a deposit, you can reduce your monthly payments as the larger the deposit you put down, the lower your monthly payments.
With a leasing agreement, you’re asked to set an annual mileage allowance – that’s how many miles you expect to drive in an average year.
This is because a leasing agreement works off the value of depreciation on the car throughout your contract. Essentially, the more you drive the car, the more depreciation will occur, therefore the more expensive your monthly payments will be – as the car’s value will be lower at the end of the contract.
The average annual mileage allowance in the UK is between 10-12,000 miles a year. But try and be as precise as possible, as if you exceed your mileage allowance, you’ll be charged at the end of your contract.
The final deciding factor is the length of your agreement. If your agreement is over a longer period of time, your monthly payments are usually lower, because you’re stretching the value of the lease over a longer length of time.
The length of a lease agreement is typically between 24-60 months, with the most common option being 48 months.
How flexible is car leasing?
For young, first-time drivers, buying an older used car can result in being tied to it for years. This is because once the money is spent, it can cost a lot more to maintain it.
Alongside, that car continues to lose value, creating an even bigger hole in your pocket.
Leasing, meanwhile, is a lot more trouble-free, as when your agreement ends, you simply hand the vehicle back to the provider and walk away.
Then, as long as you’ve kept to the terms of your agreement, you’re free to move on to another deal without any extra charges.
How can I improve my chances of being accepted for a lease?
Car leasing is a finance agreement between you and the lender. So for your best chances of being accepted, you need to prove you’ll be able to make the payments.
The finance company will look at two things – affordability and your credit history.
Affordability is when lenders look at your monthly income and outgoings to work out how much you have left over after all your essential bills.
That way they can get an accurate idea of whether you can afford the lease deal. The more disposable income you have, the more likely you are to be accepted.
Lenders also look at your credit history to see whether you’ve been a reliable borrower in the past.
This can be tricky for young, first-time drivers who haven’t had time to build up a credit history.
So if you’re young or have no credit history, make sure you spend some time getting your finances in order – pay all your bills by direct debit on time, register on the electoral roll and work on getting your credit score up.
If you have a bad credit score or no credit, you still may be able to lease a car, so don’t hesitate to speak to us and we’ll do our best to help you.
Which is the best car for me to lease as a new driver?
If you don’t already have a good idea of which car you want, it can seem daunting.
It’s best to ask yourself some questions and do a little research first. Do you need something powerful or a smaller city car? How many seats do you need? Where will you be driving it?
Secondly, you need to bear in mind the cost. That’s not only how much you can afford to pay monthly, but other factors such as how much it costs to insure and your fuel bill.
Ultimately, the kind of car you lease should balance your needs with your budget.
Finding the right car
If you already know which car you’re interested in, or even if you’re still unsure or just starting your search, you can use our handy search tool to find the right make and model for you.
Alternatively, if you want to get your lease agreement in place before deciding on your vehicle, you can do that, too.
It can save time by helping you realise your budget and also which models are best suited to your needs.
Just fill out our quick and easy online form and we’ll let you know within minutes whether you’ve been approved as well as send you a link to all your personalised Hippo Leasing deals.