Navigating the End of a Car Lease: What to Expect and How to Prepare
Car leasing has emerged as an attractive option for individuals who wish to enjoy a brand new vehicle without the full commitment of purchasing. It’s a popular choice, with more than 2 million people in the UK opting to lease a car or van. This leasing trend provides a flexible alternative to outright vehicle ownership.
There are multiple ways to finance or lease a car, such as Personal Contract Purchase (PCP) or Personal Contract Hire (PCH). These options offer the flexibility of making a decision at the end of the contract. However, it’s important to remember that your choices may vary depending on the specifics of your contract and finance agreement. Therefore, it’s crucial to clarify your options with your leasing company.
Leasing a car essentially allows you to use a vehicle for a specified period of time, for which you pay monthly installments. But what happens when that lease term ends? This guide aims to provide insights into vehicle leasing and the options available to you at the end of your car lease deal.
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Types Of Car Leasing
The type of car lease you choose directly influences what happens at the conclusion of your lease term. Primarily, there are three main types of car leases, each dictated by the type of car finance deal you opt for. Each lease type presents unique conditions and options when your contract concludes.
1. Contract Hire
Is the most prevalent form of car leasing. This type of lease enables you to utilise a vehicle for a predetermined period without acquiring ownership. Typically, contract hire involves a monthly rental plan that extends throughout the length of the contract.
Once the lease term concludes, you return the vehicle to the leasing company. On certain occasions, it may be possible to extend the lease duration, enabling you to retain the car for a more extended period. However, this option isn’t universally applicable.
2. Personal Contract Hire (PCH)
Bears much resemblance to the standard contract hire, with the only differentiation being its availability solely to private customers. Much like contract hire, PCH allows you to drive the vehicle for a designated duration without obtaining ownership. Upon reaching the end of a personal contract hire agreement, the customer must return the vehicle to the leasing company. After which, they can decide to embark on a new lease agreement if they choose to do so.
3. Personal Contract Purchase (PCP)
Differentiates itself from the other leasing types by providing the option of owning the vehicle at the end of the lease term. To do so, you must make a ‘balloon payment,’ which is a lump sum that is agreed upon at the beginning of your lease. The balloon payment grants you the option to retain the leased vehicle should you wish to do so. Conversely, if you decide not to make this payment, you can return the vehicle to the leasing company at the end of your contract.
How Does Car Leasing Work?
Leasing a car involves a straightforward process. Initially, you will need to define a budget, determine the type of car you desire, the lease duration, and your preferred payment method. If flexibility at the end of the contract is a priority for you, it might be worthwhile to consider a Personal Contract Purchase (PCP) agreement.
After establishing a clear idea of your needs and preferences, the leasing company will guide you in determining the most suitable options for you. They will assist you in identifying a lease deal that caters to your individual needs.
Once you agree on the lease terms and sign the contract, you will make an upfront payment, followed by monthly payments throughout the agreed-upon term.
Upon the conclusion of the contract, the process is relatively simple: you return the car to the finance company. Your subsequent options will hinge on the specifics of your initial finance agreement. For instance, if you have a Personal Contract Hire (PCH) arrangement, you must return the car without the option to purchase it. After that, you may contemplate taking out another lease, possibly on a newer model vehicle.
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When Will Your Car Be Collected?
As your car lease comes to an end, the majority of leasing companies typically reach out to arrange the return of the vehicle. However, it is important not to assume this will be the case with every company.
If the end of the contract is near and you have not been contacted, it’s advisable to proactively get in touch with the leasing company, as some may expect you to initiate this process. Remembering the delivery date of your leased car is beneficial, as you can add the duration of the lease to that date to determine when the vehicle should be returned. It’s a good idea to mark this date in your calendar.
In case you’ve lost track of the return date, it is crucial to contact your leasing company as soon as possible. Overlooking the return date, particularly if it is your responsibility to arrange the collection, can lead to penalty charges.
The steps to organise the collection should be outlined in your leasing contract. If any part of the procedure remains unclear, don’t hesitate to reach out to the leasing company for clarification.
Generally, when preparing for the vehicle’s collection, you will be required to furnish the leasing company with some specific details. These usually include your contact information, the vehicle’s registration number, the address where the car will be collected from, and your preferred collection time.
Preparing Your Car For Collection?
Preparing your leased car for collection involves several important steps, with guidelines typically provided by your leasing company. To begin with, it’s essential to organise all the car-related paperwork, which includes items such as the V5C registration document, servicing or repair invoices, and the car’s handbooks and service books. You’ll also need to locate the car’s spare keys. These initial steps ensure that all the necessary documentation and access tools are ready for handover.
Next, make sure to reinstall any items that you may have removed from the car during your lease period. This could include things like luggage area covers, mounting covers, storage area covers, and minor accessories like umbrellas and ice scrapers.
It’s crucial to return the car as close as possible to the condition in which you received it. Also, before the car is collected, consider having it professionally cleaned inside and out. Although the leasing company doesn’t expect the car to be in brand-new condition, cleanliness can create a positive impression.
Understanding what constitutes acceptable wear and tear is also key. This is where the fair wear and tear guidelines from the British Vehicle Rental and Leasing Association (BVRLA) come into play.
Your leasing company should be able to provide you with this information, which will further help you to prepare the vehicle for collection. According to the BVRLA, ‘fair wear and tear’ refers to the natural and reasonable deterioration of the vehicle due to normal use. It is not the same as damage that occurs due to specific events or actions such as impacts, improper storage of items, harsh treatment, or negligent acts.
Lastly, it’s important to note that every aspect of the vehicle should be in good working order, barring the normal wear expected over the course of the lease. There should be no damage to the car’s bodywork, interior, or accessories. The tyres don’t have to be brand new, but should show even wear and retain a legally acceptable amount of tread.
The interior should be free from odours or stains, and any modifications made during the lease period should be undone before collection. During the collection process, a representative from the collection company will check the vehicle’s condition with you before taking it away. This is your opportunity to ensure everything aligns with the previously mentioned guidelines.
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What Happens During Collection?
When the appointed time for car collection arrives, a representative from the leasing company will come to your location. This representative will check the vehicle’s documentation, ensure that no items are missing from the car, and verify that the mileage falls within the agreed limit. They will also conduct a thorough inspection of the car to assess any damage or excessive wear. During this process, you may need to fill out some additional paperwork.
At this juncture, any issues or discrepancies should be addressed immediately. Once everything is confirmed to be in order, the representative will drive the car away, effectively ending your responsibility for it. Remember, it’s essential to be present during this process and to thoroughly review any documents you’re asked to sign.
Keep in mind that some leasing companies might conduct an inspection before the actual collection date. You should be notified if this is the case. Also, certain companies may use a transporter truck to retrieve the vehicle. If you anticipate that the agreed-upon collection location might be too tight for a truck, make sure to inform the company ahead of time. They will either send a driver instead or request a change in the collection location.
Will I Need To Pay Car Return Charges?
The process of returning a leased car might seem straightforward, but it’s worth noting that additional charges could be incurred at the end of your lease for specific reasons. It’s not a given that you will have to pay these additional charges, but it’s important to be aware of the potential costs involved.
1. Fair Wear and Tear
Firstly, there are charges related to Fair Wear and Tear. This is the most common additional expense you should be prepared for. By familiarising yourself with the BVRLA Fair Wear and Tear guidelines, you can better understand what wear and tear on the vehicle may be considered chargeable.
2. Excess Mileage
Excess mileage charges can be added to your bill if you exceed the mileage limit established at the beginning of your lease agreement. These charges can vary widely from broker to broker, starting anywhere from 4p to 70p per extra mile. This could potentially mean you’ll be charged as much as £70 for just 100 extra miles driven!
3. Breach of Contract
Breach of Contract charges come into play if you have not adhered to the servicing and repair terms specified in your lease contract. The contract requires you to service your vehicle at regular intervals and ensure any necessary repairs are carried out in a timely manner at an approved garage. Failure to meet these terms may result in additional charges.
4. Outstanding Charges
Outstanding Charges form the fourth potential cost. These are charges that may have accumulated over the term of your lease such as speeding fines, administrative fees or repair costs. It’s your responsibility to settle these charges before the end of your lease and before you return the vehicle to avoid incurring additional fines.
5. Late Return Charges
Finally, Late Return charges may be incurred if you return your vehicle later than the date specified in your lease agreement. The amount of this fine will depend on the specific terms of your agreement and the length of the delay in returning the vehicle.
Can I Contest Any Of These Charges?
If you are dissatisfied with the findings of your lease vehicle’s final inspection, you are within your rights to challenge the report. However, this necessitates hiring an independent, qualified engineer who was not part of the original inspection team to scrutinise the evidence. The chosen individual should be mutually agreed upon by both parties involved.
If the subsequent examination favours your case, the provider will issue a full refund for the cost of the assessment. If the dispute remains unresolved, it will be escalated to the BVRLA for a final decision. Keep in mind that should the appeal not rule in your favour, not only will you not receive a refund, but you’ll also be unable to appeal the decision again.
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Can I Extend My Car Lease?
Extending a car lease is often a viable option for many individuals. This could occur when the lessee finds the leased vehicle still useful or simply wishes to delay the process of leasing a new car.
The terms and conditions for extensions typically depend on the lease agreement and the leasing company, with most companies offering extensions from a few months up to a year. It is essential to communicate with your leasing company in advance about the possibility of an extension, as procedures can vary.
It’s also crucial to remember that extending a lease may affect the monthly payments. Depending on the terms, the payments could increase or decrease.
Furthermore, you will need to consider any maintenance or repair needs the vehicle might have during the extension period. Always review the extension terms carefully, ensuring they align with your needs and financial capabilities before committing. Reach out to your leasing company for detailed information on their lease extension process.
Can I End My Car Lease Early?
Yes, returning your lease car early is an option, but it does come with financial implications such as settling outstanding finance and incurring termination fees. The exact amount to be paid depends on various factors including how much of the lease you’ve already paid off and the specific terms of your early return agreement with the leasing company. The method you used to lease your vehicle, be it Personal Contract Purchase (PCP), Hire Purchase (HP), or Personal Contract Hire (PCH), will influence your available options.
For example, if you leased your car through Personal Contract Hire (PCH) and have already paid off at least 50% of the total amount owed, you might be able to exercise an ‘early termination’ clause. This allows you to return the car without any additional charges, provided you have met all other leasing requirements.
If you owe more than 50% of the total, however, you’ll need to make up the difference before the early termination clause can be activated. It’s worth noting that termination fees can be quite steep in many cases. Therefore, it’s often beneficial to reach out to your finance provider to negotiate more favourable lease terms before deciding on early termination.
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And Finally… What Next?
At the termination of your car lease, the options available to you will largely depend on the type of finance agreement you signed at the beginning.
For instance, if you’ve leased through a Personal Contract Hire (PCH) arrangement, which is essentially akin to a long-term car rental, purchasing the car at the end of the lease period is not an option. Your responsibility is to return the vehicle and then decide if you’d like to commence a new contract on a different model.
Alternatively, if you’ve used a Personal Contract Purchase (PCP) to finance your vehicle, one of the most common ways to finance a brand new car, you’ll have three choices at the end of the lease: you can purchase the car by making a balloon payment, you can return the vehicle and terminate the contract, or you can part-exchange the car for a new one and begin a fresh contract.
A further leasing option is Hire Purchase (HP), typically chosen by those who intend to own the car at the end of the contract. With this agreement, you’re paying off the entire value of the car over a specific period, making it more costly. If you were to merely return the vehicle at the end of the contract, it would result in a significant loss.
You might also consider a short-term lease based on your requirements as numerous options are available. No matter how you choose to lease a vehicle, remember that returning a leased car with damage will incur charges. It’s always best to maintain the vehicle as if you owned it, minimizing wear and tear as much as possible.
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Need Gap Insurance?
There are a few different types of policy you can choose from when taking out your Gap Insurance cover with Click4Gap. These depend largely on how you intend to fund the purchase of your vehicle. So what car Gap Insurance is right for you?
If you paid cash for your vehicle, or paid a sizeable deposit, or if you financed it, Combined RTI Gap cover will pay out the shortfall between the cost of your vehicle and the market value at the point of claim, which is the amount your motor insurer will cover. This is cover that will protect you no matter if you use your vehicle for private use or for business.
If you leased your vehicle or it is under a contract hire agreement, Lease/Contract Hire Gap Insurance will cover you for the shortfall on your lease agreement, after your motor insurer settlement. If, for any reason, you change your vehicle within the first 90 days from the start date, we will also arrange to transfer your cover to your new vehicle without hassle or charge.