Leasing a Car – What You Need To Know
Know anyone that had to sell their car in the past year due to unforeseen circumstances? Thanks for that, COVID. As we transition into a new normal, people are using their vehicles less often, meaning the demand for vehicle ownership is decreasing. Car leasing may be a cost-effective, hassle-free alternative to purchasing a new car.
What does it mean to ‘Lease a Car’?
Let’s break it down for those of us who aren’t too sure, a car lease is essentially ‘borrowing’ a car instead of purchasing it outright. Pretty simple, right? It’s like a Netflix subscription but 10 tonnes heavier and slightly more expensive. Leasing can often be a more cost-effective way of getting use of a vehicle as it is traditionally lower in monthly costs than paying finance on a new vehicle!
Car leases are typically between 2-4 year contracts with fixed monthly payments. The contract will also often feature a yearly distance cap, meaning the usage of the car will be limited to a maximum amount of kilometres in one year.
How do I know how much would my lease be?
In most cases, your lease value will vary depending on the make and model of the vehicle, the current value of the vehicle and the estimation of the vehicle’s future value as determined by the dealership.
For example, if the vehicle is currently worth $50,000 and the dealer estimates that it will be worth $30,000 in three years, your lease would be (approximately) $555 a month to cover depreciation.
Now, all leases are different and your price may look different to the example listed above, but it’s important to understand the breakdown of your lease agreement and make an informed decision on whether the lease contract presented is right for you.
Do I need a maintenance package?
Technically, you won’t be the owner of the vehicle if you decide to lease it, as it remains in the ownership of the dealer. Therefore, it is entirely your responsibility to ensure that the car remains in good and working condition for the duration of your contract.
A maintenance package is occasionally offered with lease contracts, it will help cover the costs of repairs and routine servicing on the vehicle. If the car isn’t damaged at your own fault, a maintenance package can help keep a bit of money in your pocket throughout the duration of the lease.
If you are looking for more information around insuring your new car or if you have any questions, visit us at ericinsurance.com.au.
This article may contain general financial product advice that does not take into account your personal financial circumstance. Make sure you read the Product Disclosure Statement (PDS) before making any decisions about your insurance.