Upsurge In Car Leasing But Caution Required

Friday, 24. October 2008

As if to support my comments made over the last few weeks market analyst Datamoniter has recorded a growth in vehicle leasing in the fleet sector as more companies release cash tied up in their vehicles and reduce exposure to market conditions by selling off the cars they own and replace them with leased vehicles. New vehicle sales generally slumped further in August from the July drop of 7.3% to an unprecedented 15.6%. Consumers, unaware of the cash flow benefits of leasing new cars, have really not taken the opportunity to save on board whilst business users have been quick to make the move. The big worry is that in the US consumers who are less able to arrange leasing on their cars are now reverting to very long term loan periods in order to get the monthly payments down to the levels of lease payments. The periods are often set at 72 months, well beyond the length of time that drivers would want to keep their cars. This would make it less likely that there would be any equity in the car should the driver wish to early terminate without the use of a Voluntary Termination. I have always said that you should keep the repayment period down to about the length of time that you expect to keep the car. It should be stated however, that in the UK we have the Voluntary Termination rule that states that you can return the car to the funder once you have paid 50% of all the costs at no further cost to you provided the agreement is either a hire purchase or credit sale agreement that falls within the Consumer Credit Act. For a full explanation as to what you need to do if you would like to VT your car you need to buy a copy of my book ‘An Insider Guide To Car Finance’ by visiting www.carfinanceandleasinginfo.co.uk . By Graham Hill