A convertible for 79 dollars a month, a new laptop for 14.60 dollars a month – the low leasing rates also attract private individuals.
Leasing has been popular for many years, but financing through this process is often more expensive than credit. It is also only worthwhile for certain people and not for everyone.
Find out in this article when leasing really makes sense for private customers and which pitfalls to consider.
Private leasing is booming in cars
Leasing is no longer only interesting for business people, but also for private individuals. You can now lease items for private use at low monthly rates – such as household appliances, computers, exercise bikes or musical instruments. However, this is only worthwhile if the costs are cheaper than other forms of financing and the guarantee commitments are generously regulated.
Private leasing is becoming increasingly popular, especially when buying a car. With car leasing, the leasing company gives the lessee the car for a fixed term – usually two to four years. The dealership delivers the vehicle and the customer pays a deposit and a monthly leasing fee depending on the conditions. At the end of the term, he returns the car to the leasing company or can buy it at the residual value.
Leasing with residual value or kilometers are driven?
There are two variants of the car leasing contract: The first contains a mileage settlement contract in which the maximum number of kilometers is agreed. If the customer has driven more kilometers, he has to pay extra. This could get expensive. Conversely, the lessee gets money back if he falls below the specified mileage.
In the second variant, residual value leasing, a residual value of the vehicle is fixed in the contract and compared with the actual value of the vehicle at the end of the term. If it is below the calculated value, the lessee must pay the difference. If the residual value exceeds the calculated value of the car, money is returned.
When does car leasing make sense for private individuals?
Private consumers cannot deduct the leasing rates from tax if they use the vehicle privately. Apart from that, car leasing can prove to be a useful financing option if you:
- want to drive a new car every two to four years.
- want to get rid of the car before it needs to be repaired.
- use the car a lot.
- have little equity and want to buy the car after the end of the term.
How to recognize a good offer
If you decide to lease a car, you can use the so-called leasing factor to roughly check how good the offer really is. When evaluating the leasing factor:
- Leasing factor less than 1.3: good offer
- Leasing factor less than 1.0: very good offer
- Leasing factor less than 0.7: top offer
Example of the calculation: On the leasing platform LeasingMarkt.de we choose a vehicle for a sample calculation, in this case, a VW Polo GTI with sophisticated equipment. The monthly rate for private individuals is given as 169.00 dollars. The purchase price for this model is 18,240.30 dollars.
Calculation of the leasing factor : $ 169.00 / $ 18,240.30 * 100 = 0.93
The leasing factor for the VW Polo is 0.93, which is between “top offer” and “very good offer”. This procedure enables you to determine quickly and easily whether an offer is worthwhile from a financial point of view.
Note: Some offers may incur additional costs, e.g. for the transfer of the vehicle or one-time special payments. These costs are not taken into account when calculating the leasing factor.
Before you decide on a leasing contract, note that
- Not only the monthly installments but also the total cost of leasing, including processing fees, are cheaper than buying cash and buying with a car loan.
- You generally cannot terminate leasing contracts properly. Therefore, you cannot redeem the contract prematurely if you unexpectedly have income thrown into the cash register.
- an exit clause is definitely set in your leasing contract. This way, you can separate yourself from your vehicle before the end of the term.