How to get the new car you want, at a price you can afford.

Whether you are a growing family looking to upgrade to a MPV or looking for a city car just to get you from a to b, the choice available to us in the UK is vast.  Once you have decided on the lifestyle of the car, there are the choices of colour and specification, but all this comes at a cost.  How do you get a new or nearly new car without having to shell out thousands of pounds in one payment?  One modern answer is to lease.
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Car leasing

For many years’ car leasing was aimed at businesses but in recent times, more and more people are taking advantage of personal car leasing. Furthermore, even if you do not have a great credit score there are still plenty of car leasing companies out there which can cater for you needs. Compass Vehicle Services Limited (CVS Ltd) is one of the leading bad credit car companies in the UK.  Take a look at their bad credit car leasing page for more information.

How does a car lease work?

There are two different types of lease and these can be a little confusing. Basically, a PCP lease deal allows you to purchase the car at the end of your agreement should you want to. Below is a short description of the two types of leasing available: 

PCP = Personal Contract Purchase

This is where you pay on average 10% of the value of the car as an initial payment, you then pay monthly repayments to the end of your agreed term.  When you take out the agreement the value of the car will be specified, and it will be this ‘balloon payment’ you will need to pay at the end should you want to take ownership of the car.  
At the end of the PCP you will be given 3 options

  1. Buy the car ‘Balloon Payment’
  2. Exchange for another car using the equity of the car you already have
  3. Walk away

Notes for PCP:

  • When your agreement comes to an end the car must be in good condition, you will be liable for any repairs that need to be made to the car.
  • You will have an agreed mileage, if you go over the mileage you will have to pay extra / mile (this is hugely significant as you could pay as much as 10 or 20 pence per mile that is over your annual allowance)!
  • Your equity is in that car, therefore you will have to stick with that specific dealership to be able to benefit from the equity.  If you wish to move to a different dealer your equity is lost.


PCH – Personal Contract Hire

There are a lot more deals out there for PCH, with some deals even waivering the initial payment, and just requiring the normal month in advance repayment.  As a rule, PCH will require an initial payment, this will be ‘x’ times your monthly repayments, for example –

If your monthly repayments on a car are £200/month, you may be asked for 3 repayments up front meaning your initial payment will be £600. This is a 3 (3 months payments in one go) x 36 (followed by 36 single monthly payments) payment profile.  

Look out for payment profiles when looking at advertised vehicles on car leasing sites, this will help you work out what you will need to pay as an initial payment.  Some companies such as CVS Ltd are able to create leasing agreements tailored to your individual budget, and therefore only show example cars and prices on their website.
At the end of the PCH you will be given 2 options

  1. Renew 
  2. Walk away

Notes for PCP:

  • When your agreement comes to an end the car must be in fair wear and tear condition, you will be liable for any major repairs that need to be made to the car.
  • You will have an agreed mileage, if you go over the mileage you will have to pay extra / mile.
  • You do not have any equity in the car, which means you are able to shop around to find you next car leasing deal.
  • Monthly repayments are usually lower than PCP or a car loan.
  • No car depreciation value worries
  • No Road Tax to pay


The leasing secret

So, if you have ever wondered how your neighbours can afford the latest model of car, or how they can afford to change their car every 3 years, the secret is out, they probably have the vehicle on a personal lease.

Many drivers are taking advantage of leasing to get a better car with more spec, at a monthly budget they can afford.  Choosing cars that perhaps they would previously avoid due to depreciation values and the worry of having to sell them in the future.

If you go for a nearly new car, be aware of the cars plate, remember if something is too good to be true, then it probably is.  If you are being offered a car for £100 / month, but the car is 8 years old you could be opening up all sorts of problems for yourself.  Remember you are responsible for the maintenance of your leased car during your agreement term.

At CVS Ltd for example, their cars are never more than 12 months old, which means they have plenty of manufacturer’s warranty left on them.  As new cars only require a MOT after 3 years you will only be paying out for one MOT at the end of your lease.
Debbie Goodsell
Debbie is the marketing manager at CVS Ltd, a leading poor credit car leasing company from Kent in the UK.


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