Buying a car may be relatively easier than purchasing a house because there are none of those dreaded transfer costs to factor in. But is it worth the hassle?
Leasing a car is slowly becoming popular among those who want the convenience of a whip, sans the monthly repayments (and car insurance and maintenance plan) that come with it.
Ghana Msibi, executive head of WesBank Motor, says he understands why there’s a rise in car leasing.
“Consumers are becoming more financially savvy and understand that a car is a depreciating purchase. Most finance deals are done over 72 months, yet hardly any customers keep their cars for that long,” he explains.
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Some of the advantages of leasing include:
1. You can drive a new car more regularly. A normal sales contract is limiting because you drive that car until it’s paid off. By renting, you can reduce the term of a contract, allowing you to select a newer model should you wish to.
2. Affordable instalments because you only pay for the time you use the car.
3. A shorter financing contract.
4. Car insurance can be built into your lease contract, reducing car-related debit orders. However, there are disadvantages to this method.
Msibi cautions: “There is no car ownership when the contract ends.” Rental contracts also have Ts&Cs, which you must adhere to or you’ll be charged additional levies, he adds.
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Some limitations include a cap on how many kilometres you can drive the leased car for and a termination fee that you must pay upfront, should you decide to return the car before the lease expires.
Msibi also shares that there’s no set cost on leasing a car. Each case is treated individually.
“Your credit profile, value of the car you want to rent and interest rates are considered before a car is leased to you,” he adds.
Because the value of a car depreciates, leasing might be the most financially-savvy option. If you’re interested, Msibi suggests approaching a bank, reputable car dealer or manufacturer to tailor-make a contract for you.
