Thank you to our personal leasing customer from Leigh (Greater Manchester), for visiting the CarLease UK team to collect their new car – the diesel Volvo V90. Like many of our customers, this was the first time for them moving to a contract hire product as opposed to a hire purchase agreement. As such, there were a couple of basic queries about car leasing and the main differences between leasing and buying a car.
When people say “leasing” they often refer to contract hire, which our foremost financial product for supplying vehicles. Contract hire is a long-term and fixed agreement for using a vehicle i.e. this is a usership style product. The customer arranges to use the car for anywhere between 2 – 5 years, with many customers choosing the 3 year term (as this fits within the warranty period). This is very much a rental-style product and so is designed to be suitable for those customers, personal or business, who do not want to own the car at the end of the contract. The price you pay in a contract hire arrangement will depend on a number of factors, including:
1. The car (or van) you require;
2. The annual mileage;
3. Whether you wish to maintain the vehicle yourself (driver-maintained) or if you wish for this to be included (funder-maintained); and
4. Your initial rental.
With contract hire, like buying a car, the general rule of thumb is that the more expensive a vehicle is, the more expensive a monthly rental will be. However, what makes our industry somewhat unique is something called “residual value” (RV). The way in which a finance company will value car is based on the rate of deprecation, as they are trying to ascertain what a vehicle will be worth at the end of the contract (cars are sold at auction after being collected from a customer).
Some cars depreciate better than others – this is down to the model, engine type, fuel-type or vehicle-type.
For example, in 2018 the most popular type of car has become a petrol based SUV/4×4. If a finance company believes this will be the case in 2020/2021, they will provide these vehicles with a stronger RV and the monthly rentals will be better than comparable vehicles. In some cases, the RV approach can create a peculiar situation where a more expensive car can produce a better monthly rental than a cheaper car i.e. a Mercedes C-Class being cheaper than a Ford Mondeo.
As part of the calculation above, the annual mileage a customer requires is also taken into account. A lease contract can based on anywhere between 5,000 and 50,000 miles per annum. The mileage you choose should be accurate for what you require as this will set your monthly rental and, if you return the car over-mileage, you can pay an excess mileage cost. When you buy car the mileage you cover will affect the car’s end value when you sell or part-exchange it. However, you are never subject to any penalties. With contract hire, you will be charged for going beyond your contact mileage and, as some finance companies do not let you change this during the contract, this can be an inflexible product in some situations. As such, make sure your mileage is accurate; just because the monthly rental is affordable does not mean that the annual mileage is accurate!
Contrary to popular belief, contract does NOT include insurance. This is something which you must supply separately Fuel/insurance inclusive products are now only supplied by specific products from a main dealership. One thing that you can include with contract hire is a “funder-maintained” contract. This allows you to include the cost of all servicing, maintenance, tyres (including punctures in some cases) and breakdown recovery. This essentially creates a position where you only need to fuel and insure the car.
The certainty of cost and convenience of this product makes this more unique that purchase style alternatives i.e. “service packages”.
Your monthly rental will also be based on your “initial rental”, which is the amount of capital you outlay in month 1. On our website we advertise prices based on a “6 spread” initial rental. This essentially means that if a car is £200 per month, in month 1 you would pay £1200. The initial rental is not entirely fixed and you do have some flexibility as to what this can be – some customers want to create a “no deposit” situation where your monthly rental is the same throughout the contract whereas others will want to put as much capital in month 1 has is possible.
There is no right or wrong answer, this is down to doing something which effectively meets your individual needs and requirements.
In terms of the car shown here, the Volvo V90 Diesel Estate 2.0 D4 R Design 5dr Geartronic [Auto], this was based on the following configuration:
· Metallic Paint – Onyx Black
· Contour Sports Leather/Nubuck – Charcoal
· Metal Mesh Inlays
· 18” 5 Spoke Diamond Cut Matt Black Alloy Wheels
· Winter Pack – S90/V90
As standard the car includes 18” alloys, rear park assist, sensus connect navigation, front park assist, 2 zone climate control, rain sensing wipers, hill start assist, sports floor mats, Bluetooth, adaptive cruise control, forward collision warning, lane keep assist, lane mitigation, road edge detection, speed sensitive steering, 12.3” instrument display, touch screen display, DAB radio, electrically adjustable and heated door mirrors, DAB radio, LED headlights, gearshift paddles, perforated leather, ski hatch, sports pedals, footwell illumination, keyless start, spare wheel and anti-theft alarm including immobiliser. If you want to upgrade the car, consider dark tinted side windows, a blind spot information system and the winter pack for the a complete car.
On the technical-side, company car and business users can note the P11d at £41,200.00 and CO2 at 127g/km. The 1969CC 8 speed auto engine delivers 58.9 combined MPG, 190ps and 0-62 times of 8.5 seconds. Service intervals on a diesel Volvo are every 12 months.
Find the best lasing deals for personal or business use on the Volvo V90 estate right here @CarLease UK —> http://bit.ly/2Cr5boa – if you like this car then you may also like our recent review of the BMW 520i Touring too…