Published on April 12th, 2020 | by Daniel Sherman Fernandez0
To Lease or Not to Lease after Lockdown
With so many uncertainties in the market this 2020 and maybe even stretching into 2021, the subscription/leasing car business looks promising as businesses struggle to find their footing and balance during this lockdown period. Current newish (3-5 year old) car owners might stay put and not venture into a new or used car showroom. However, for Malaysians looking for to buy their first car, subscription/leasing could be an option that they consider.
Have you ever considered leasing a luxury car rather than buying one? It’s essentially like renting an apartment. You get the use of the vehicle but don’t own it, and therefore, don’t have to worry about the upkeep; something that can be very expensive in luxury models. You’re also not tied down to one choice because you are only leasing the vehicle for a specific length of time, usually between one and four years.
Many people choose to go the subscription/leasing route because it gives them a bit more freedom. Owning a vehicle is a big commitment, but leasing one allows you to swap it out on a fairly regular basis for something new. This means you can stay up to date on the latest advancements when it comes to in-car technology, as well as vehicle models, engine options and safety precautions. Many luxury car dealers also offer lower leasing payments, making the latest vehicles much more attainable so you can drive the car of your dreams on a tighter budget.
That’s not to say that there aren’t restrictions that come with leasing a car. The vehicle is not yours, so you will have to abide by the rules of the company leasing it to you. There is also usually a clause about expected mileage. The agreement will stipulate how far you are allowed to travel in the vehicle for each year of the lease agreement, and you will likely be charged for any extra miles that you cover.
However, there are numerous other benefits to leasing a luxury car instead of buying one that can far outweigh the restrictions:
You don’t have to worry about maintenance
As with renting an apartment, you are not responsible for the maintenance of a car that you are leasing. You will still need to take it to the mechanic to get serviced on a regular basis, or if something goes wrong. However, the cost of the maintenance will fall to the company or dealership that you are leasing the car from, and they will deal with all warranty claims. For luxury cars, maintenance and repair costs can run extremely high, so if you don’t have to cover them, this is a plus.
The exact details of what the company will cover should be stipulated in your lease agreement, but it usually includes regular servicing to cover wear and tear from use, and fixing anything that breaks due to a manufacturer’s fault. Damage from reckless behavior on your part will need to be paid for from your account.
There are also certain things that you will need to do in order to keep your lease vehicle in good condition. The company leasing it to you will not be happy if you return the car in a bad state due to neglect or misuse. The type of measures you are expected to take include checking the tires and the oil, keeping the car clean inside and out, and ensuring that repairs are done as soon as the problem is noticed. If you treat the car as if it were your own, it’ll be easy to stay on top of these things and keep it in tip-top condition throughout the lease period.
Your monthly payments are lower
When you lease a vehicle, you’ll have a contract in place with a set amount for monthly payments. These payments may go up annually, but that should be set out in the contract and the increase linked to inflation. At the end of your contract, you may have the option to buy the vehicle for an amount that was stipulated at the beginning of the agreement. Alternatively, you can trade the vehicle in for something new, and start an entirely new lease agreement.
In many ways, monthly payments for leasing are very similar to the repayments you would make if you took out a loan to buy a car. However, in almost all cases, the amount to lease a vehicle will be lower than how much you would have to pay monthly on a loan to buy the car. This means that if you lease a luxury vehicle you’ll be paying a lot less for the use of a car that may not have been within your budget to buy in the first place.
It’s important to note that at the end of the contract you won’t own the vehicle like you would if you were paying off a loan, so you won’t have acquired an asset.
You get a new vehicle on a regular basis
The beauty of leasing a luxury car is that at the end of the contract, you can get a new car. Most current available lease agreements are for the latest models, meaning you could always be driving the most recent model.
At the end of your contract, you can simply return the vehicle you were driving. From there, you’ll be able to swap out the car for something else and sign a new contract for your next lease. If you’re sticking with the same company and you have a good credit rating and repayment history, the entire process will be extremely quick and fuss-free.
There also shouldn’t be a waiting period, even if this is the first vehicle that you’re leasing. A credit rating and financial history check are all that most leasing or subscription companies require before the paperwork is signed. The process is far quicker than waiting to hear about approval on a loan. This is because the companies that lease out vehicles hold the car as surety, and know that they can simply take it back at any point if the person leasing it defaults on a payment.
Subscription or leasing offers a fixed budget, low maintenance alternative that lets you drive the car.