Car leasing - differences and comparisons at a glance

What does car leasing mean?

When you lease a car, you do not become the owner of a vehicle. You only use it for the agreed period and pay a monthly fee. This fee is then the leasing rate.

How does car leasing work?

In most cases, the main types of leasing offered are mileage leasing and residual value leasing.

• Mileage leasing: You agree a maximum mileage with the provider for the term of your contract. The monthly installments are calculated based on this fixed number of kilometers.

• Residual value leasing: Your provider determines the expected residual value of the car at the end of the term. You pay the difference between the new value and the estimated residual value plus interest in installments during the term.

Here you will find an overview of the most important differences between these two types of leasing:

Source: www.autobild.de

What are the requirements?

The general requirements for obtaining a leased car are in most cases:

• Good credit rating and creditworthiness: Reputable lessors usually carry out a credit check. This is important to ensure that you can pay the monthly installments. Creditworthiness is usually verified by a positive query in debtor registers such as KSV.

• Fully comprehensive insurance: Most providers require fully comprehensive insurance for leased vehicles. The reason for this is that the vehicle remains the legal property of the lessor and the lessor naturally wants to ensure that it is well insured.

• Driver's license: Of course, the driver of the leased car needs a driver's license.

• Minimum age: Most providers require a minimum age of 18 years for car leasing.

• Down payment: There are providers who do not require a down payment, but you should find out exactly whether this is possible with your preferred provider. Some lessors do not want to take any risks and therefore require a down payment - especially for higher-value vehicles or medium creditworthiness.

Do I have to take out insurance for my leased car myself?

This can vary from provider to provider. If the insurance is not included, you will have to take out suitable car insurance yourself. Most lessors require fully comprehensive insurance. However, there are also leasing packages that cover everything. Depending on the amount of the monthly payment, insurance benefits for maintenance or tire changes may also be included. The advantage of this is that the monthly rate is easier to calculate because (almost) all costs relating to the car are covered.

Is leasing also available for used cars?

Yes, this option is also offered by many lessors. The monthly costs can be lower and in some cases you also have access to higher quality vehicles. However, the choice is usually limited, as the cars on offer come from company fleets or leasing returns, for example.

Important to note:

• The leasing rates for used cars are often lower than for new cars, but the residual value can be more difficult to predict, which can lead to higher risks with residual value leasing.

• The maintenance and repair requirements may be higher than for a used car. Check the condition and previous repairs of the car thoroughly before signing your leasing contract.

• The manufacturer's warranty may have already expired. Ask the lessor for an alternative warranty to protect you against unexpected repair costs.

• Make sure that the current mileage of the vehicle to be leased is appropriate and agree on a shorter term.

Are other people allowed to drive my leased car?

This basically depends entirely on the conditions of your lessor and also on the insurance. Many providers restrict use to you and people living in your household. Read carefully what conditions must be met if other people are driving the leased car. Sometimes the provider stipulates that prior consent must be given before the car can be driven by others.

Also check with your insurance company whether damage caused by others with your car is covered. It may be necessary to register additional drivers, which can also affect the amount of the insurance premiums.

Our tip: Always ask if you are unsure. Communicate everything openly so as not to take any unnecessary risks.

Can I install accessories in a leased car (or have them installed)?

Here too, it is best to ask your lessor. Before you install accessories or have them installed by others, you should obtain your provider's approval. Of course, the type of accessory is also important. If it can be easily removed at the end of the term, your lessor is often more likely to approve it. If the installation increases the objective value of the leased car independently of this, there is often nothing to stop you from agreeing. This applies, for example, to alarm systems or audio systems. However, please note that some modifications may affect the manufacturer's warranty.

Important: If your lessor agrees to the changes, always get this in writing so that you can prove this agreement.

Can I drive my leased car abroad?

In many cases, traveling to the EU or Switzerland should not be a problem. However, there are lessors for whom you need written consent or who do not allow you to travel abroad. A complete ban usually applies to travel to non-EU countries or the Asian part of Turkey. Check your contract clauses carefully to be on the safe side.

Be sure to check the different local regulations before you travel. In other countries, there are often different speed limits and other requirements for driving vehicles. A green card may also be required in some countries - it is best to check this directly with your insurance company. In some countries, tolls and vignettes are compulsory. Make sure that your car is equipped accordingly before you start your journey.

Important: If you break down or have an accident abroad, some providers charge repatriation costs. You should also check this point in your contract clauses.

Source: www.adac.de

Can I reduce my leasing rate by doing it myself?

There are various ways to potentially reduce the leasing rate:

• The most common form of personal contribution is probably the down payment at the beginning of the leasing contract. This can significantly reduce the monthly installments and thus lower the running costs.

• Some leasing providers also allow you to take on certain services yourself instead of including them in the leasing contract. This can affect repair costs or vehicle insurance and reduce costs if you have the option of purchasing these services at a favorable price.

• You can also trade in an old vehicle. The value of your current car can then lead to a reduction in the leasing amount and lower the monthly installments.

• You could reduce the annual mileage by avoiding trips or switching to public transportation. A lower number of kilometers usually also leads to lower leasing rates.

• If you have an excellent credit rating, you can often negotiate better conditions for a leasing contract. By reducing the risk of default, a lessor may be more willing to offer you lower interest rates, which can lower the overall cost and monthly payments.

Do I always have a purchase option?

No, not all leasing providers allow you to buy the vehicle at the end of the term. If your leasing contract includes a purchase option, you have the option to buy the car at the end of the term, but are usually not obliged to do so. In this case, you are often free to decide at the end of the term whether you want to buy the car, return it or extend the leasing contract with new conditions. However, there are also leasing providers who do not offer a purchase option. These are designed to allow you to change the vehicle at regular intervals.

Tip: If you want to buy your car at the end, pay attention to the estimated residual value when concluding your leasing contract.

Can I terminate my car leasing contract early?

In principle, you can usually get out of your leasing contract - but this can involve considerable costs.

Therefore, check the conditions of your leasing contract carefully and check the clauses that describe early termination. In most cases, there are fees for terminating your contract out of turn. Early repayment of the remaining leasing installments may also be required.

If you need to cancel your leasing contract spontaneously but do not want to terminate it due to high termination fees, the following alternatives are available to you:

• Ask your lessor whether an individual agreement is possible. If there are special circumstances, a compromise solution could perhaps be found.

• Ask your leasing company whether you can transfer your contract to another person. You may find someone in your circle of friends or relatives who is interested. The transfer fee will most likely be lower than the termination fee.

• If you can, you could find out whether you can buy the vehicle. In this case, you could sell it on yourself and avoid the costs of prematurely terminating the contract.

What happens if I have an accident with my leased car?

Before you consider what actions might be relevant to your lease, make sure that everyone involved is safe or that the rescue chain has been set in motion.

If you have taken out your own car insurance that is not included in your leasing contract, inform your insurance company about the accident. Then also notify your leasing provider and inform them of the situation. Any repairs to your vehicle should be carried out in a workshop that has been authorized by the leasing provider.

Depending on your insurance, you may have to pay an excess. If the repair permanently reduces the value of the car, your leasing provider could also charge additional costs. Check your leasing contract thoroughly right from the start about the procedure for accidents and damage. This way, you will know what to do in the event of an accident.

What are the advantages and disadvantages of car leasing?

Car leasing may be less about "good" or "bad" and more about your personal lifestyle, your driving needs and your financial means. Below you will find an overview of the general advantages and disadvantages of car leasing:

Car leasing, car loan or car pawn - what makes sense when?

It all depends on your individual needs. Below you will find the most important differences and requirements that you could take into account when making your decision.

Car leasing

This option makes it easier for you to switch to a new vehicle every few years. This means you always have access to the latest models and technologies. If you conclude a contract for mileage leasing, you also bear no risk for the depreciation of the vehicle. You also don't have to worry about reselling or buying a new one. In addition, many leasing contracts include maintenance services at favorable conditions. This means you always have an overview and many costs are covered by the leasing rate. As a business owner and freelancer, you can also deduct the leasing rate from your taxes under certain conditions.

Car loan

The main difference to car leasing is that you own the car from the outset and can make all the decisions yourself. There are therefore no restrictions regarding accessories, mileage, trips abroad or the like. However, the monthly installments can be higher than the leasing installments, as you take out a loan for the entire purchase price of the car.

Car loan

If you urgently need money and are considering selling your old car in order to lease a car afterwards, a pawn loan can be a good alternative for you. Especially if you have a poor credit rating - this is not a general exclusion criterion for a car pawn loan.

With a car loan, you use a car you own as collateral to borrow money. You can simply continue to drive your vehicle for the entire term of the loan. At the end of the term, you either pay back the total amount borrowed, reduce it or extend your loan and only pay the fees. You can find out exactly how much money you can get for your vehicle online in the car loan calculator.

The most important questions & answers

What does car leasing mean?

With car leasing, you pay monthly installments for a vehicle for a fixed period of time without becoming the owner.

Can I deduct leasing costs from my tax bill?

Yes, as a business owner or self-employed person, you can deduct the leasing installments from your taxes.

What types of contract are there for car leasing?

The most common forms of contract are mileage leasing (based on an agreed mileage) and residual value leasing (based on the estimated residual value of the vehicle at the end of the contract).

Is a deposit always necessary?

Not always, there are also providers who do not require a deposit under certain conditions.

Is insurance always included in the leasing rate?

No, you usually take out the mandatory fully comprehensive insurance yourself, but there are also lessors who offer a complete package.

Is leasing also available for used cars?

Yes, you can also lease used cars.

Can other people drive my leased car?

As a rule, yes, but exceptions and conditions may be stipulated in the contract.

What happens at the end of the term?

Depending on the contract, you can buy the vehicle at a residual value, return it or renew the leasing contract.