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Leasing a Car: Penalty Pitfalls to Avoid

Leasing a vehicle is often an ideal option for those who like to upgrade their transport every few years, and prefer the simplicity of fixed cost motoring. However, there are several penalties which can be incurred to an extent that can negatively impact the value of a lease deal, should drivers not be careful.

Here are the penalty pitfalls to avoid (for a full break down of costs when leasing see this guide from Lease Your Next Car)…

Penalty pitfall #1: Excess mileage charges

Lease contracts state a maximum number of miles that should be on the involved motor’s clock when it is returned at the end of the agreement. Should the lessee exceed this quoted figure, they will incur a penalty charge.

While the penalty per additional mile is often just a few pence (the charge is dependent on how the selected car’s depreciation is affected by mileage), this can quickly add up. As such, it makes sense to do some maths to ensure the mileage included in an agreement of interest suits your circumstances, before signing any related paperwork. Dividing the total mileage across the number of months covered by the contract is a useful sum to conduct – you’ll then have a ‘per month’ mileage aim to help keep you on track, should you decide to accept the lease.

It is the case that some dealerships will waive an excess mileage fee (if reasonable), should the lessee be close to the end of their existing contract, and has agreed to lease another vehicle with the same company.

Penalty pitfall #2: Early return of leased vehicle fee

If you’re close to exceeding your agreed mileage but have quite a few months to go until your lease contract ends, you may be considering returning your vehicle early. However, the earlier your return your motor, the greater the penalty fee will be.

There are a couple of ways this fee can be avoided, however. Like the penalty for extra mileage, some dealerships will waive the early return charge for those close to the end of their existing contract, so long as they agree to lease another vehicle via the same dealership. Additionally, a number of companies exist that will agree to buyout your existing contract (and cover associated penalties), in exchange for you entering another lease agreement with them/their affiliates.

If you do decide to take out another lease, you should ensure it comprises a mileage limit that meets your requirements, as to prevent history repeating itself.

Penalty pitfall #3: Penalties for damage beyond ‘fair wear and tear’

Many dealerships can provide lease packages which include some maintenance services (examples include basic repairs, servicing, breakdown recovery and MOT testing). The monthly payments for such packages are higher, but allow the cost of maintenance to be spread, and offer some contingency should anything go awry.

While such lease packages are ideal for helping to ensure your vehicle is well sustained throughout your contract, you’ll still incur penalty charges should it be returned with any damage considered not to be ‘fair wear and tear’.

Of course, the definition of ‘fair’ damage can vary from person to person. To protect customers, trade body BVRLA (the British Vehicle Rental and Leasing Association) has clear definitions in place. A lessee, for example, may not consider a slash across any section of a leased car’s interior upholstery to be ‘unfair’, since it does not prevent the car from operating. However, such aesthetical damage adds to the vehicle’s market depreciation and so the driver responsible should expect to be charged (aesthetical repairs are rarely included within maintenance lease packages).

It is worth noting that it can often be more cost effective to pay for repairs yourself than simply accept related end-of-contract penalty charges.

To summarise: it is very important to consider whether a large enough mileage limit is included within a lease deal of interest, and how accident prone/heavy-handed you are, before signing on the dotted line.

photo credit: ‘PixelPlacebo’

Jess

Caterham fan, fashionista, big shoe wearer, Fiat Punto owner. Can be found tweeting as @Jetlbomb.

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