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Probably the most common question asked at the moment without a simple answer. Most lenders will extend their leases these days so the option is there. Most will ask for your current mileage then calculate the extension based on your contract mileage, your average mileage or they may ask what mileage you will cover over the extension period.

In most cases we are seeing an increase in monthly cost so be prepared to pay either the same as you are currently paying or an increase. Some will offer a casual extension whilst others a fixed period extension of 3, 6 or 12 months – or all. The casual extension means that you continue to pay for the car until such times as you no longer need it.

This is particularly useful if you can’t coordinate the collection of the old car with the delivery of the new car or if the delivery of the new car has been delayed. This can often be the most expensive method so expect to pay 20 – 25% more than you are currently paying per month.

A fixed extension may possibly see a reduction in rental, especially if you are under mileage. You will need to contact either the funder or if you have an agreement through me we can sometimes organise this for you. You will receive a quote and from that decide what period you would like to extend for.

This now brings us to the next very vexing question – should you extend simply because you can’t find a suitable car on an acceptable rate or, if you were to replace your current car with exactly the same car, the rate is currently substantially more? Either way, should you extend in the hope that the rates will reduce in the future? And if you do that how long should you extend for?

We are now in very turbulent times. The industry faces two main challenges. Real world emissions tests and Brexit. With regard to the first challenge the old test procedures (NEDC) and standards have been dumped to be replaced by the Worldwide Harmonised Light Vehicle Test Procedure (WLTP).

The tests are still carried out in laboratory conditions but now take twice as long under tighter scrutiny as a result of cars being tested under NEDC test conditions previously being capable of being ‘fixed’. I’ll mention no names  but VW. Manufacturers have had to carry out substantial design and production modifications in order to make their new and existing models compliant with Euro emissions regulations which has and will increase the cost of new vehicles.

Since September last year till the end of August this year (2018) current models tested under the old NEDC procedures could still be sold but if they remained unsold at the end of August could be forcibly scrapped. As a result, some big discounts have been given away to sell the cars before getting to the point where they had to be scrapped or pre-registered. There has been a little relaxation of the rules whereby a small % of annual sales, if remaining in stock at the end of August, could still be sold in September.

The WLTP tests included options fitted to the car. As we know if a car is fitted with bigger wheels it increases the drag coefficient and, in turn, increases fuel consumption whilst also increasing emissions. The next phase of testing that starts from September 2018 is Real Driving Emissions testing (RDE). This entails the connection of measuring equipment to the car on test and driving it on public roads, measuring the real results, then comparing them to the results achieved in the WLTP tests.

All of this is costing money and could be increasing the cost of new cars as well as delaying deliveries. Land Rover shut down its order book for 3 months and I’m hearing that low sales, because of lack of cars and not so keen finance deals, has resulted in dealerships facing closure. So these uncertain times are causing rates to be very unstable.

We then have Brexit.  On the 29^th March 2019 we officially leave the EU with many suggesting that we could well leave without a deal which means we fall back on WTO rules. The effect of this has been an estimated increase in car costs of 10% or an average increase per car of £2,400. Unknown by many is the level of discount we currently enjoy when we lease our cars.

Some have discounts of up to 45% factored into the rental rates. So one could argue that with so much fat to play with, will we see any major change in the rentals? This brings me to the crucial question, If the rates aren’t where you would like them to be when changing your car now, should you extend your agreement in the hope that you will achieve a better deal in a year’s time?

This is pretty much an impossible question to answer. The real answer could lie in attitude! For years we have been the only European country to embrace leasing as an option to fund cars both personally and through businesses. This has resulted in a lot of ‘dumping’ of cars into the UK for them to be leased.

The beauty of leasing is that the price paid by the leasing companies for their cars don’t affect the price of used cars on dealership forecourts. So manufacturers have used this to move cars that are on run out and even, on occasions, new models that aren’t selling well to put more cars on the road to give the impression that the cars are popular.

As an example, I won’t give makes and models, but some £22,000 (retail cost) cars were offered to me at £11,750 prepared and delivered anywhere in the UK by a main dealer as long as they were only supplied on contract hire. This discount made the cars very cheap to rent on contract hire but the good news for dealers was that by supplying new cars on say £170 + VAT per month lease deals it didn’t affect 12-month-old used cars on their forecourt for £17,000. Imagine what would happen to their used cars if the new cars were offered for cash at £11,750?

So the fact is that we could do without the increase in costs due to no deal being struck. In addition, we are already seeing attempts by manufacturers and leasing companies to push their finance products throughout Europe which will divert extra discounts away from the UK, increasing the pain further as more European countries take on leasing as a product.

So whilst we are so unsure about the future my advice has to be to consider the worst case and if there is anything available that is on an attractive deal at the moment snap it up – even if the car isn’t your first choice. Mine and the feeling of the industry is that we will have to go through some pain, certainly in the short term, that could put the replacement cost of like for like cars well beyond their current rates.

Extend for 12 months and you may see rates through the roof but if you take out a new 3 year lease I’m hopeful that things would have stabilised by the end of the 3 year lease period. But what do I know?