Leasing for beginners: A guide to the car leasing contract!

Leasing for beginners: A guide to the car leasing contract!

Reading a leasing guide for beginners is good for drivers who are considering renting a vehicle for a longer period of time rather than buying a new car. The fact is that funds used to pay for a new car cannot be used for other purchases. Companies in particular benefit from high liquidity when leasing. Renting a vehicle is not only interesting for companies, but also represents an alternative to buying for private individuals.

What's under car leasing to understand?

car leasing offers several advantages. In particular, car enthusiasts who want to drive up with the latest vehicle model at any time benefit from changing vehicles at contractually agreed intervals. The leasing contract specifies the period for which the car is 'rented out'. As the lessee, you have the option of determining which time frame suits your own wishes and needs. In the forms of the leasing contracts, different modalities with regard to the usability can usually be selected. These range from twelve months to 60 months.

What is the nature of the leasing contract?

The framework conditions for the payment of the leasing installments can usually be designed flexibly. You can gain an advantage by paying a one-time deposit prior to using the vehicle. Depending on the amount of the down payment, the monthly leasing installments can be reduced to a comfortable minimum. This is particularly interesting for beginners when it comes to leasing.

The bank remains the owner of the vehicle for the entire period of use. The vehicle registration document is also stored there. If you default on a leasing installment, the credit company can intervene or renegotiate further payment terms. As a driver, you are merely the owner of the vehicle.

What else is regulated in a leasing contract?

The leasing contract regulates all the details that are important in relation to the vehicle leasing. In particular, the brand, the model and the equipment of the car are mentioned in the regulations. In addition, the duration of the term and the amount of the total mileage are specified in the contract. The written work also contains information about other agreements such as the amount of the monthly installment to be paid or a down payment to be transferred before the start of the contract.
Furthermore, users can read about the contractual consequences of deviating from the contractual conditions. An example of this is mileage. You must note that this often deviates from the previously carried out assessments. If the limit is exceeded, an additional payment will be due in most cases.

This is how the return takes place after the end of the contractually agreed lease: leasing for beginners

If the contract expires because the end of the period of use has been reached, the car must be returned to the contractual partner, which is usually the dealership. The advantage of this procedure is the fact that the 'renter' does not have to worry about selling the vehicle. If you get too used to owning the car within the period of use, you can purchase the vehicle.

In the regular case, the contract states which final payment is due. You then pay the remaining amount in one lump sum to the bank. Many banks also offer the option of financing the balance. This allows you to purchase the vehicle even if you don't have significant financial resources.

Advantages and disadvantages of the leasing contract: leasing for beginners

Many entrepreneurs and freelance users benefit from the advantages of financing compared to buying a vehicle. After all, some costs can be claimed for tax purposes, which minimizes the tax burden. Private individuals cannot use this privilege for themselves.

Advantages of the car leasing contract:

– Tax benefits for entrepreneurs and the self-employed
- always up to date - with current car models
– Inexpensive monthly installments
– Lessee remains liquid
– Fixed monthly costs for a simplified calculation
– Individual contractual agreements possible

Disadvantages:

– The vehicle remains the property of the leasing company
– in the event of non-contractual return – risk of additional payments
– early termination of the contract is not possible
– High costs and further financing requirements when buying a car after the leasing period has expired

Leasing for beginners: does the credit rating have an impact on the leasing contract?

Before concluding the leasing contract, the leasing company checks, as with a loan, whether the customer is liquid. A credit check is carried out for this purpose. The company usually makes a request to the Schufa or another credit agency. If there are no entries and the score is satisfactory, you have already opened up an important obstacle on the way to the leasing contract.

If the result is the opposite, i.e. if there is a negative entry in the register and a negative score, it may be necessary to provide a guarantor. This ensures that the monthly installments are paid by the guarantor in the event of payment defaults. Many companies have started to demand a special payment in the event of an unfavorable credit rating. A correspondingly high down payment can reduce the risk of default.

This is how residual value and mileage leasing differ: a guide to car leasing contracts

When leasing a vehicle, different models are available, which differ fundamentally from one another. Residual value and mileage leasing are the most commonly offered variations.

– Leasing for beginners: residual value leasing

With residual value leasing, a monetary amount is determined for the residual value at the time the leasing contract is concluded. This indicates the expected value of the vehicle after the end of the leasing period. However, this alone puts you at risk. In very few cases does the value determined at the beginning of the leasing period actually match the residual value of the leasing vehicle. The reason is that a lot has changed in the meantime. The vehicle may be depreciated if the market situation has changed or the calculation was too optimistic. Furthermore, there may have been a reduction in value due to defects caused by accidents or other damage.

– Leasing for beginners: mileage leasing

With mileage leasing, the contract includes how many kilometers the vehicle is expected to drive per year. At the end of the contract period, this figure may have been greatly exceeded or fallen short of. In the event of an overrun, an additional payment amount is usually contractually stipulated. However, it can also be the case that there is no corresponding agreement in the event of a shortfall, so that no compensation takes place in this case. Therefore, when concluding the leasing contract, pay attention to which passage was included in the contract for this situation.

Are there any other costs besides the monthly rate?

Lessees have to reckon with some ancillary costs when taking over the vehicle. When leasing a new car, in most cases transfer costs are required, which can amount to up to 1.000 euros. You also have to pay registration fees at the Road Traffic Office and license plates. Furthermore, vehicle taxes are due as well as contributions to vehicle insurance.

When concluding the insurance contract, you must ensure that you have fully comprehensive insurance in addition to liability insurance. It is also advisable to arrange what is known as GAP insurance. This occurs in the event of a total loss. Otherwise you have to bear the risk of replacing the difference between the current value and the replacement value in the event of such damage. A corresponding passage can be found in most leasing contracts, since the fully comprehensive insurance only replaces the current value.

Conclusion: a guide to the car leasing contract helps to better understand leasing contracts

Many lessees are not aware of the type of contract at the beginning of the lease. In most cases, this only becomes apparent when there is a problem. It is therefore important to read a guide to the car leasing contract before concluding the set of rules. This means that you are well prepared to understand the many details of leasing and, if necessary, to have individual agreements included in the contract. Most leasing companies are flexible in this respect and are happy to respond to customer requests.

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