Extending Leases Can Be Costly!

Monday, 1. March 2010

Hindsight is great isn’t it? We can identify exactly where we went wrong and occasionally where we went right! When the recession started to bite, many businesses and individuals, who were leasing their cars and due to change, decided to extend their leases. Not such a bad thing if the lease was only 2 years in the first place but many of those that extended from 3 years to 4 years have maybe regretted that decision. And for those thinking about it now it may be worth reflecting on the experiences of those who decided to extend over the last 12 months. Clearly 3 years is a pivot point in the life of a car, an MOT becomes due and unless you are covering high mileage the manufacturer’s warranty runs out. Some more major items may need attention such as cam belt, shock absorbers, brake discs, clutches, batteries and exhausts and of course without a warranty these can be very expensive, with some items simply wear and tear. My car had a bulb go on the speedo pointer making it virtually impossible to see your speed at night. My car is covered by its warranty so it will be repaired free of charge but the repair isn’t simply a bulb change, they are going to have to replace the complete instrument cluster. Had this happened in year 4 this would probably have cost a fortune and even if I had remembered to take out a warranty, not been covered as it’s a blown bulb! With some engine management systems running into thousands of pounds to replace it becomes very risky to extend contracts into the 4^th and 5^th year. The British Vehicle Rental and Leasing Association (BVRLA) has predicted that more cars will be replaced this year as companies review the cost of extending their leases. They predict that 1 million new cars will be registered this year for business use with 90% being leased. Make sure that you know the likely financial exposure if you choose to extend leases beyond 3 years. By Graham Hill