Car leasing is fast becoming the most popular way to get a car these days. The more people sign up to lease a car, the more others will hear about it. This has naturally led to many misconceptions about car leasing to be spread about. We are here to identify this errors and to correct them.
If you are interested in leasing a car, then Hippo Leasing has many a great deal on a huge selection of cars available.
Who owns the vehicle at the end of the lease?
The main misconception that appears is who owns the car at the end of a lease. This is a confusion between a leasing agreement and a finance agreement. Finance agreements such as Personal Contract Purchase (PCP) are often confused with leasing because of your ability to hand the car back at the end of the agreement. However, because you have the option to purchase the car in full through a balloon payment, PCP is a finance agreement.
Personal Contract Hire is a leasing agreement and you will never own the car. The lender owns the car throughout the duration of the leasing agreement and when it comes to an end, you hand the car back.
If you are looking to lease cars for your business, the principle remains. If you choose a finance agreement like BCP, you have the option to hand the car back to the lender or you can pay off the balloon payment and take full ownership. With BCH, you simply return the cars at the end and your business never owns the cars.
“Excess mileage reaches into the thousands!”
Well, no. It only does that if you ignore the mileage allowance that is set at the beginning of the leasing agreement by yourself. At the beginning of a leasing agreement, you and your account manager discuss your circumstances and needs and set out an annual mileage allowance for each year of the leasing agreement. This is added up and your car should not be returned to the lender with a higher mileage on it than what was agreed.
If you do this, you will be charged a penalty fee for each additional mile over the agreed amount. This should come as a surprise to you as your account manager should adequately explain that to you at the beginning of the agreement, which is why we ask you to set your own annual mileage allowance.
“I was charged for a little bit of scuff”
This is a similar misconception to the mileage complaint. All lenders have a wear and tear policy, which means that when a car is leased, there is an expectation that it will be returned in good condition with the likelihood of a little wear and tear.
However, if the car is returned and it is badly damaged beyond the wear and tear guidelines, then similarly to going over the agreed mileage, you will face penalty charged for the damage. As long as you stay within the wear and tear guidelines, you should not have to face any further charges.
Leasing is more expensive than buying
The truth is that the opposite is likely to be the case. It all comes down to your driving lifestyle. For example, if you drive a lot for work and rack up around 20,000+ miles a year, then leasing may not be the best choice because the higher the annual mileage allowance, the higher your monthly payments will be.
However, if you drive the average 10,000 miles a year, leasing a car will likely be cheaper than purchasing a car through car finance. This is because, through most car finance agreements, you are paying for the value of the car on a monthly basis. With leasing, you are paying to cover the cost of the depreciation of the vehicle, which means you will likely be paying less on a monthly basis. This is because the depreciation value will always be less than the full value of the car.
There is always a balloon payment
This is untrue. In fact, through a contract hire agreement, there is no balloon payment at all. This is because you will be handing the car back to the lender and therefore there is no need for a balloon payment.
That being said, balloon payments are available on a PCP and Lease Purchase finance options. This is because you are purchasing the car to own it rather than simply lease it. If you are asked to pay a balloon payment, you are signing up for a finance deal rather than a leasing deal.
If you are interested in leasing a car, Hippo Leasing is here to help. Our dedicated account managers can offer you great deals on a huge variety of cars and answer any questions you may have. We don’t want you to have any misconceptions about car leasing, especially if it is the best option for you.