Car leasing is one of the more popular ways to run a vehicle, because it offers cheap monthly payments and low hassle.
Leasing is one of the cheapest ways to get a new car on to your driveway. Often called Personal Contract Hire (PCH), or just Contract Hire, car leasing deals are similar to Personal Contract Purchase (PCP) deals but, as the name suggests, with leasing you’re effectively hiring the car for the duration of your contract, while with a PCP deal you have the option to own the car eventually.
What Is Car Leasing?
When you lease a car, you pay monthly to drive a vehicle. At the end of the lease agreement, you return the vehicle to the dealership. Unlike when you buy a car, you don’t own a leased vehicle. Essentially, car leasing is renting a car for a short or long period.
The length of the lease and how much you pay monthly depend on your specific lease agreement. Your lease agreement will require you to make monthly payments. At the end of the lease, you might have the option to buy out the vehicle if you want to keep it. Otherwise, you return the car to the dealership.
Requirements for Car Leasing?
The specific requirements for leasing a car depend on the lender. However, lease requirements usually include:
A Good Credit Score
You typically need a good average credit score to qualify for an auto lease. Fewer lenders offer leases to borrowers with less-than-perfect credit. Also, even though you don’t own a lease, the lender reports your monthly payment to the credit bureaus. This means making late payments or missing payments can affect your credit score.
Proof of Consistent Income
Lenders also require lessees to have proof of consistent income to qualify for a new car. The minimum income requirements will vary based on the lender and the vehicle’s lease or purchase price. You can prove your employment with pay stubs or tax returns.
Proof of Insurance
Leasing companies also require proof of insurance before leasing a vehicle. You must show proof of insurance covering the lease’s entire purchase price. Remember most lease terms require drivers to carry auto insurance for the length of the lease.
Defaulting on your insurance during the lease could void your agreement. The lender might also purchase their own insurance for the vehicle and push the cost off to you.
Valid Driver’s License
Leasing contracts require borrowers to have a valid driver’s license. Whether you lease a new or used car, you must provide the lender with a copy of your driver’s license. Make sure your driver’s license information is up to date and matches your lease application details to help speed up the process.
What Happens if You Miss Your Leasing Payment?
Late payments with any form of finance can affect your credit score and make it harder to arrange finance in future.
If you’ve missed a payment – either by accident or because you can’t afford it – the finance company may charge you an additional fee. The exact penalties for late payments should be outlined in your contract. Some lenders will be more flexible than others, but if you keep missing your payments, the finance company has the right to repossess the car.
The best thing to do if you have missed a payment is to immediately contact the finance company. If it genuinely happened by accident and you make the payment as soon as possible, you shouldn’t have too much trouble.
Conclusion: Car Leasing
Leasing can be a great way to get yourself into a much better car but it might not be for everyone. So, look into what suits yourself!!
Make sure that before entering into a contract, you’ll need to be confident that your income will be steady enough that you’ll be able to keep making the payments for the length of the lease, and that you’ll be able to stick within the mileage limit. And, you need to understand that at the end of the lease you’ll need to hand back your pride and joy. If you want to get a new car regularly and can sort out the ideal deal for your needs, leasing can be a hassle-free way to run a car.
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